Internal Revenue Bulletin 2016-29 (PDF rendition): IRS Notices

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# INTERNAL REVENUE BULLETIN

IRS

Bulletin No. 2016-29
July 18, 2016

## 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 2016-42, page 67.

Notice 2016-42 sets out a proposed Qualified Intermediary
("Ql") agreement revising and updating the current agreement,
Rev. Proc. 2014-39, published in July 2014. The revised QI
agreement updates the current agreement by providing more
detailed procedures regarding how qualified intermediaries
satisfy their compliance review obligations and sets out terms
and requirements for qualified intermediaries that want to act
as qualified derivatives dealers with respect to transactions
subject to section 871(m).

### Notice 2016-43, page 132.

This notice publishes the reference price under § 45K(d)(2)(C) of
the Internal Revenue Code for calendar year 2015. The reference
price applies in determining the amount of the enhanced oil
recovery credit under § 43, the marginal well production credit
under § 45I, and the percentage depletion in case of oil and
natural gas produced from marginal properties under § 613A.

### Notice 2016-44, page 132.

The notice announces the inflation adjustment factor and
phase-out amount for the enhanced oil recovery credit for
taxable years beginning in the 2016 calendar year. The format
of the notice is identical to the format of previously published
notices on this issue. The notice concludes that because the
reference price for the 2015 calendar year ($44.39) does not
exceed $28 multiplied by the inflation adjustment factor for the
2015 calendar year ($28 multiplied by 1.6464 = $46.01), the
enhanced oil recovery credit for qualified costs paid or incurred
in 2016 is determined without regard to the phase-out for
crude oil price increases. The notice contains the previously
published figures for taxable years beginning in the 1991
through 2015 calendar years. The enhanced oil recovery
credit for qualified costs has been phased out completely for
calendar years 2006 through 2015. The enhanced oil recovery
credit for qualified costs was last determined without regard to

the phase-out for crude oil price increases in the 2005 calen-
dar year.

### Notice 2016-45, page 135.

The notice announces that under § 613A(c)(6)(C) of the Internal
Revenue Code, the applicable percentage for purposes of deter-
mining percentage depletion on marginal properties for calendar
year 2016 is 15 percent. The format of the notice is identical to
the format of notices previously published on this issue.

### T.D. 9773, page 56.

These final regulations provide guidance on the information
required to be reported for country-by-country (CbC) reporting.
The final regulations generally require U.S. business entities
that are the ultimate parent of a U.S. multinational enterprise
(MNE) group earning annual revenues of $850,000,000 or
more in the prior reporting period to report certain financial
information on a tax jurisdiction-by-tax jurisdiction basis. The
regulations require the U.S. ultimate parent to list the U.S. MNE
group's business entities indicating each entity's tax jurisdic-
tion (if any), country of organization, tax identification number
(if any), and main business activity, as well as CbC financial
information for each tax jurisdiction in which the U.S. MNE does
business. The CbC financial information includes income, prof-
its, income taxes, stated capital, accumulated earnings, num-
ber of employees, and tangible assets other than cash.

## EMPLOYEE PLANS

### Rev. Proc. 2016-37, page 136.

Rev. Proc. 2016-37 sets forth the procedures for the deter-
mination letter program for individually designed plans and the
six-year remedial amendment cycle system for pre-approved
plans. Rev. Proc. 2007-44 is clarified, modified, and super-
seded. Sections 2.07 and 24.03 of Rev. Proc. 2015-36 are
modified. Sections I and III of Notice 2015-84 are modified.

Finding Lists begin on page ii.

## The IRS Mission

Provide America's taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with 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.

It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal 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, identify-
ing 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 .- 1986 Code.

This part includes rulings and decisions based on provisions of
the Internal 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, Legisla-
tion 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 Sec-
retary (Enforcement).

### Part IV .- Items of General Interest.

This part includes notices of proposed rulemakings, disbar-
ment and 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 contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

## Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

26 CFR 1.6038-4: Information returns required of
certain United States persons with respect to such
person's U.S. multinational enterprise group.

### T.D. 9773

### DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1

#### Country-by-Country Reporting

AGENCY: Internal Revenue Service (IRS),
Treasury.

ACTION: Final regulations.

SUMMARY: This document contains
final regulations that require annual
country-by-country reporting by certain
United States persons that are the ultimate
parent entity of a multinational enterprise
group. The final regulations affect United
States persons that are the ultimate parent
entity of a multinational enterprise group
that has annual revenue for the preceding
annual accounting period of $850,000,000
or more.

DATES: Effective Date: These regula-
tions are effective June 30, 2016.

Applicability Date: For dates of appli-
cability, see § 1.6038-4(k).

FOR FURTHER INFORMATION
CONTACT: Melinda E. Harvey, (202)
317-6934 (not a toll-free number).

### SUPPLEMENTARY INFORMATION:

#### Paperwork Reduction Act

The IRS intends that the information
collection requirements in these regula-
tions will be satisfied by submitting a new
reporting form, Form 8975, Country-by-
Country Report, with an income tax return.
For purposes of the Paperwork Reduction
Act, the reporting burden associated with
the collection of information in these regu-
lations will be reflected in the OMB Form
83-1, Paperwork Reduction Act Submis-
sion, associated with Form 8975.

#### Background

This document contains amendments
to 26 CFR part 1. On December 23, 2015,
a notice of proposed rulemaking (REG-
109822-15) relating to the furnishing of
country-by-country (CbC) reports by cer-
tain United States persons (U.S. persons)
was published in the Federal Register
(80 FR 79795). A public hearing was re-
quested and was held on May 13, 2016.
Comments responding to the notice of
proposed rulemaking were received. Af-
ter consideration of the comments, the
proposed regulations are adopted as
amended by this Treasury decision. The
public comments and revisions are dis-
cussed below.

#### Summary of Comments and Explanation of Revisions

##### 1. United States Participation in CbC Reporting

Multiple comments expressed support
for the implementation of CbC reporting
in the United States. However, one com-
ment recommended that the Treasury De-
partment and the IRS decline to imple-
ment CbC reporting because, according to
the comment, U.S. multinational enter-
prise (MNE) groups' direct costs of com-
pliance will exceed the United States
Treasury's revenue gains, and there will
be high, unanticipated costs from inadver-
tent disclosures of sensitive information.
This recommendation is not adopted. U.S.
MNE groups will be subject to CbC filing
obligations in other countries in which
they do business if the United States does
not implement CbC reporting. Thus, a de-
cision by the Treasury Department and the
IRS not to implement CbC reporting will
result in no compliance cost savings to
U.S. MNE groups. In fact, failure to adopt
CbC reporting requirements in the United
States may increase compliance costs be-
cause U.S. MNE groups may be subject to
CbC filing obligations in multiple foreign
tax jurisdictions. U.S. MNE groups might
also be subject to varying CbC filing rules
and requirements in different foreign tax
jurisdictions, such as requirements to pre-

pare the CbC report using the local cur-
rency or language.

In addition, CbC reports filed with the
IRS and exchanged pursuant to a compe-
tent authority arrangement benefit from
the confidentiality requirements, data
safeguards, and appropriate use restric-
tions in the competent authority arrange-
ment. If a foreign tax jurisdiction fails to
meet the confidentiality requirements,
data safeguards, and appropriate use re-
strictions set forth in the competent au-
thority arrangement, the United States will
pause exchanges of all reports with that
tax jurisdiction. Moreover, if such tax ju-
risdiction has adopted CbC reporting rules
that are consistent with the 2015 Final
Report for Action 13 (Transfer Pricing
Documentation and Country-by-Country
Reporting) of the Organisation for Eco-
nomic Co-operation and Development
(OECD) and Group of Twenty (G20)
Base Erosion and Profit Shifting (BEPS)
Project (Final BEPS Report), the tax ju-
risdiction will not be able to require any
constituent entity of the U.S. MNE group
in the tax jurisdiction to file a CbC report.
The ability of the United States to pause
exchange creates an additional incentive
for foreign tax jurisdictions to uphold the
confidentiality requirements, data safe-
guards, and appropriate use restrictions in
the competent authority arrangement.

##### 2. Form 8975, Country-by-Country Report

At the time of publication of the pro-
posed regulations, the country-by-country
reporting form described in the proposed
regulations had not been officially num-
bered and was referred to in the proposed
regulations as Form XXXX, Country-by-
Country Report. The country-by-country
reporting form remains under develop-
ment but has been officially numbered.
The final regulations amend the proposed
regulations to reflect the official number
of the form, Form 8975, Country-by-
Country Report, (Form 8975 or CbCR).

### 3. Constituent Entities and Persons Required to File Form 8975

In the preamble to the proposed regu-
lations, the Treasury Department and
the IRS requested comments regarding
whether additional guidance was needed
for determining which U.S. persons must
file Form 8975 or which entities are con-
sidered constituent entities of the filer.
Specifically, the Treasury Department and
the IRS requested comments on whether
additional guidance on the definition of a
U.S. MNE group was necessary to address
situations where U.S. generally accepted
accounting principles (GAAP) or U.S. se-
curities regulations permit or require con-
solidated financial accounting for reasons
other than majority ownership, as well as
situations, if any, where U.S. GAAP or
U.S. securities regulations permit separate
financial accounting with respect to
majority-owned enterprises.

### A. Variable interest entities

Multiple comments addressed the in-
clusion of variable interest entities (VIEs)
as constituent entities that are part of the
U.S. MNE group. In general, a VIE may
be consolidated with another entity for
financial accounting purposes, even
though that other entity may not control
the VIE within the meaning of section
6038(e). Some comments recommended
against expanding the definition of a U.S.
MNE group to include VIEs and further
recommended that, if those entities are
nonetheless included, an exception should
apply in cases in which the U.S. MNE
group is unable to obtain the necessary
information from a VIE. Other comments
expressed concern that entities like VIEs
would be part of the MNE group for pur-
poses of foreign law relating to CbC re-
porting and, for consistency with such
law, recommended that U.S. MNE groups
be permitted to include such entities. Still
other comments recommended that the
definition of constituent entity should not
be limited to majority-owned entities and
should be expanded to include entities in
which the ultimate parent entity owns,
directly or indirectly, a 20-percent or
greater equity interest.

The final regulations do not modify the
definition of constituent entity in the pro-

posed regulations. Because the final regu-
lations are promulgated under the author-
ity of section 6038, the definition of
control in section 6038(e) limits the for-
eign business entities for which U.S. per-
sons can be required to furnish informa-
tion. Thus, the information described in
§ 1.6038-4(d)(1) and (2) is not required
for foreign corporations or foreign part-
nerships for which the ultimate parent en-
tity is not required to furnish information
under section 6038(a) (determined with-
out regard to §§ 1.6038-2(j) and 1.6038-
3(c)) or any permanent establishment of
such foreign corporation or foreign part-
nership.

### B. Permanent establishments

Under proposed § 1.6038-4(b)(2), a
business entity includes a business estab-
lishment in a jurisdiction that is treated as
a permanent establishment under an in-
come tax convention to which that juris-
diction is a party, or that would be treated
as a permanent establishment under the
OECD Model Tax Convention on Income
and on Capital 2014 (OECD Model Tax
Convention), and that prepares financial
statements separate from those of its
owner for financial reporting, regulatory,
tax reporting, or internal management
control purposes. One comment recom-
mended that the reference to the OECD
Model Tax Convention be revised to ac-
count for changes to the definition of per-
manent establishment that will be incor-
porated into the OECD Model Tax
Convention as a result of work under Ac-
tion 7 (Preventing the Artificial Avoid-
ance of Permanent Establishment Status)
of the BEPS Project.

Upon further consideration, and taking
into account the comment received, the
Treasury Department and the IRS have
determined it would be more appropriate
for the final regulations to modify the pro-
posed regulations' reference to a perma-
nent establishment in the definition of
business entity for greater clarity and con-
sistency with the intended meaning of the
Final BEPS Report. Accordingly, the final
regulations provide that the term perma-
nent establishment includes (i) a branch or
business establishment of a constituent
entity in a tax jurisdiction that is treated as
a permanent establishment under an in-

come tax convention to which that tax
jurisdiction is a party, (ii) a branch or
business establishment of a constituent
entity that is liable to tax in the tax juris-
diction in which it is located pursuant to
the domestic law of such tax jurisdiction,
or (iii) a branch or business establishment
of a constituent entity that is treated in the
same manner for tax purposes as an entity
separate from its owner by the owner's tax
jurisdiction of residence. This approach is
more consistent with the Final BEPS Re-
port and generally would avoid the need
for a U.S. MNE group that has already
determined under applicable law whether
it has a permanent establishment or a tax-
able business presence in a particular ju-
risdiction to make another determination
under the OECD Model Tax Convention
solely for purposes of completing the
CbCR.

### C. Grantor trusts and decedents' estates

Proposed § 1.6038-4(b)(2) defines a
business entity as a person, as defined in
section 7701(a)(1), that is not an individ-
ual. Under this definition, a grantor trust
with an individual owner or owners would
be a business entity that could be subject
to CbC reporting, notwithstanding that the
individual owner or owners are generally
treated as the owner of the grantor trust's
property for federal income tax purposes
and would not be subject to CbC reporting
if they owned the property directly. Sim-
ilarly, under the proposed regulations, a
decedent's estate would be a business en-
tity that could be subject to CbC reporting,
notwithstanding that during the dece-
dent's lifetime, he or she was an individ-
ual exempt from CbC reporting. Addition-
ally, under the proposed regulations, an
individual's bankruptcy estate would be a
business entity that could be subject to
CbC reporting, notwithstanding that be-
fore entering bankruptcy, the individual
debtor would not be subject to CbC re-
porting. In light of the nature of grantor
trusts, decedents' estates, and individuals'
bankruptcy estates and their close connec-
tion to individual grantors, decedents, and
individual debtors, the Treasury Depart-
ment and the IRS have determined that it
is not appropriate to include grantor trusts
with only individual owners, decedents'
estates, and individuals' bankruptcy es-

tates in the definition of business entity.
Accordingly, the final regulations exclude
decedents' estates, individuals' bankruptcy
estates, and grantor trusts within the mean-
ing of section 671, all the owners of which
are individuals, from the definition of busi-
ness entity.

### D. Deemed domestic corporations

The proposed regulations define a U.S.
business entity as a business entity that is
organized, or has its tax jurisdiction of
residence, in the United States. One com-
ment requested that the final regulations
clarify whether companies that elect to be
treated as domestic corporations under
section 953(d) will be treated as U.S. busi-
ness entities resident in the United States.
In response to this comment, the final
regulations expressly provide that foreign
insurance companies that elect to be
treated as domestic corporations under
section 953(d) are U.S. business entities
that have their tax jurisdiction of resi-
dence in the United States.

#### 4. National Security Exception

The preamble to the proposed regula-
tions requested comments on the need for
a national security exception for reporting
CbC information and on procedures for a
taxpayer to demonstrate that such an ex-
ception is warranted. Multiple comments
stated that the information provided on a
CbCR does not present a national security
concern. Other comments recommended
that the final regulations include a national
security exception but did not recommend
an appropriate scope of the exception or
procedures to demonstrate that an excep-
tion is warranted in a particular case. One
comment recommended that no informa-
tion should appear on a CbCR with re-
spect to activities performed by a constit-
uent entity of a U.S. MNE group under a
U.S. government contract with certain
agencies. Other comments recommended
a bright-line test whereby U.S. MNE
groups that conduct a majority of their
business with the U.S. Department of De-
fense or U.S. government intelligence or
security agencies could claim an auto-
matic exception from reporting any infor-
mation other than identifying information,
such as company names, jurisdictions of

incorporation, tax identification numbers,
and addresses. These comments also rec-
ommended that U.S. MNE groups that
conduct a significant amount (for exam-
ple, more than 25 percent) of their busi-
ness with the U.S. Department of Defense
or U.S. government intelligence or secu-
rity agencies should be allowed, with the
approval of the IRS, to claim a similar
exemption from reporting.

The Treasury Department and the IRS
have consulted with the Department of
Defense regarding the information col-
lected on the CbCR. The Department of
Defense concluded that such information
reporting generally does not pose a na-
tional security concern. Accordingly, the
final regulations do not provide a general
exception for information that may relate
to national security. Nonetheless, the De-
partment of Defense continues to consider
the national security implications of the
CbCR in particular fact patterns, and fu-
ture guidance may be issued to provide
procedures for taxpayers to consult with
the Department of Defense regarding the
appropriate presentation of CbC informa-
tion in such fact patterns.

### 5. Partnerships and Stateless Entities

A business entity that is treated as a
partnership in the tax jurisdiction in which
it is organized and that does not own or
create a permanent establishment in that
or another tax jurisdiction generally will
have no tax jurisdiction of residence under
the definition in proposed § 1.6038-
4(b)(6) other than for purposes of deter-
mining the ultimate parent entity of a U.S.
MNE group. Under the proposed regula-
tions, tax jurisdiction information with re-
spect to constituent entities that do not
have a tax jurisdiction of residence, or
"stateless entities," would be aggregated
and reported in a separate row of the
CbCR. The preamble to the proposed reg-
ulations indicates that partners of a part-
nership that is a stateless entity would
report their respective shares of the part-
nership's items in their respective tax ju-
risdiction(s) of residence.

A comment requested clarification as
to whether the partnership or its partners,
or both, should report the partnership's
CbC information. In response, the final
regulations provide that the tax jurisdic-

tion of residence information with respect
to stateless entities is provided on an ag-
gregate basis for all stateless entities in a
U.S. MNE group and that each stateless
entity-owner's share of the revenue and
profit of its stateless entity is also included
in the information for the tax jurisdiction
of residence of the stateless entity-owner.
This rule applies irrespective of whether
the stateless entity-owner is liable to tax
on its share of the stateless entity's in-
come in the owner's tax jurisdiction of
residence. In other words, the stateless
entity-owner reports its share of the state-
less entity's revenues and profits in the
owner's tax jurisdiction of residence even
if that jurisdiction treats the stateless en-
tity as a separate entity for tax purposes.
In the case in which a partnership creates
a permanent establishment for itself or its
partners, the CbC information with re-
spect to the permanent establishment is
not reported as stateless, but instead is
reported as part of the information on the
CbCR for the permanent establishment's
tax jurisdiction of residence.

A comment requested clarification re-
garding whether distributions from part-
nerships and other fiscally transparent en-
tities should be excluded from owners'/
partners' reported revenue. In response,
the final regulations clarify that distribu-
tions from a partnership to a partner are
not included in the partner's revenue. Ad-
ditionally, the final regulations provide
that remittances from a permanent estab-
lishment to its constituent entity-owner
are not included in the constituent entity-
owner's revenue.

### 6. Clarification of Terms

The preamble to the proposed regula-
tions requested comments on the manner
in which the proposed regulations require
the reporting of information on taxes paid
or accrued by U.S. MNE groups and their
constituent entities on taxable income
earned in the relevant accounting period.
One comment requested that "total ac-
crued tax expense" in proposed § 1.6038-
4(d)(2)(v) be revised to read "accrued cur-
rent tax expense" in order to reflect only
operations in the current year and not de-
ferred taxes or provisions for uncertain tax
liabilities. The proposed regulations
clearly state that the relevant taxes to be

reported relate only to the annual account-
ing period for which the CbCR is pro-
vided and exclude deferred taxes and pro-
visions for uncertain tax liabilities.
Therefore, the comment is not adopted.

The preamble to the proposed regula-
tions also requested comments on whether
the descriptions of any of the other items
in § 1.6038-4(d)(2)(i) through (ix) re-
garding tax jurisdiction of residence infor-
mation should be further refined or
whether additional guidance is needed
with respect to how to determine any of
these items. One comment requested that
the definition for tangible assets be re-
vised to clarify that intangibles and finan-
cial assets are excluded consistent with
the Final BEPS Report. In response, the
final regulations expressly provide that
tangible assets do not include intangibles
or financial assets.

A comment noted that the term reve-
nue excludes dividends from other con-
stituent entities and recommended that
this exclusion be extended to all forms of
imputed earnings or deemed dividends.
The Treasury Department and the IRS
agree that imputed earnings and deemed
dividends that are taken into account
solely for tax purposes should be treated
the same as dividends for purposes of the
CbCR. Accordingly, the final regulations
incorporate this recommendation.

Multiple comments recommended that
the wording "total income tax paid on a
cash basis to all jurisdictions" in proposed
§ 1.6038-4(d)(2)(iv) should be modified
to read "total income tax paid on a cash
basis to each tax jurisdiction" to avoid
misinterpretation of the "all tax jurisdic-
tions" language to require taxes paid by
entities that are tax residents of different
tax jurisdictions to be aggregated rather
than reported on a country-by-country ba-
sis as intended. The Treasury Department
and the IRS interpret the language of the
proposed regulation to require the total
income tax paid on a cash basis to any tax
jurisdiction by constituent entities that
have a tax residence in a particular tax
jurisdiction to be reported on an aggre-
gated basis for that particular tax jurisdic-
tion of residence but not the aggregation
of taxes paid by constituent entities that
have different tax residences. For in-
stance, if a constituent entity pays income
tax in its tax jurisdiction of residence on

its earnings from operations in that coun-
try and is subject to withholding taxes on
royalties received from licensees in an-
other country, taxes paid with respect to
the income and the taxes withheld with
respect to the royalties should be reflected
on an aggregated basis on the CbCR in the
row for the constituent entity's tax juris-
diction of residence. The Treasury Depart-
ment and the IRS are concerned that the
alternative language proposed in the com-
ments could be misinterpreted to require
amounts paid to different tax jurisdictions
by constituent entities resident in a single
tax jurisdiction to be reported on a disag-
gregated basis. Accordingly, this com-
ment is not adopted.

Multiple comments also recommended
the inclusion of two additional items, de-
ferred taxes and provisions for uncertain
tax positions, in the information required
to be reported on a tax jurisdiction-by-tax
jurisdiction basis. This recommendation
has not been adopted in the final regula-
tions because it would impose an addi-
tional reporting burden beyond the infor-
mation described in the Final BEPS
Report.

Multiple comments recommended that
the final regulations clarify that the infor-
mation listed in proposed § 1.6038-
4(d)(2)(i) through (ix) is reported in the
aggregate for all constituent entities resi-
dent in each separate tax jurisdiction. Al-
though the language in the proposed reg-
ulations does indicate that the information
is to be provided with respect to each tax
jurisdiction in which one or more constit-
uent entities of the U.S. MNE group are
resident and in the form and manner that
Form 8975 prescribes, the final regula-
tions provide additional language to clar-
ify that the information is to be presented
for each tax jurisdiction as an aggregate of
the information for all constituent entities
resident in that tax jurisdiction. Multiple
comments requested that the final regula-
tions clarify whether the information must
be provided for only the constituent enti-
ties in each tax jurisdiction or whether the
information must also be provided for
U.S. MNE group members that are not
constituent entities, for instance VIEs.
The Treasury Department and the IRS
have determined that additional language
is unnecessary because § 1.6038-4(d)(1)
of the proposed regulations expressly re-

quires reporting of information only with
respect to constituent entities of the U.S.
MNE group.

The final regulations provide that, for a
constituent entity that is an organization
exempt from taxation under section
501(a) because it is an organization de-
scribed in section 501(c), 501(d), or
401(a), a state college or university de-
scribed in section 511(a)(2)(B), a plan de-
scribed in section 403(b) or 457(b), an
individual retirement plan or annuity as
defined in section 7701(a)(37), a qualified
tuition program described in section 529,
a qualified ABLE program described in
section 529A, or a Coverdell education
savings account described in section 530,
the term revenue includes only revenue
that is included in unrelated business tax-
able income as defined in section 512.

### 7. Other Form or Information Modifications

Multiple comments recommended that
additional information be included on the
CbCR, such as identification of constitu-
ent entities as "pass-through" and a legal
entity identifier for each constituent entity
using a standard international system for
identifying individual business entities.
The final regulations do not adopt these
recommendations because they would im-
pose an additional reporting burden be-
yond the information described in the Fi-
nal BEPS Report.

### 8. Voluntary Filing Before the Applicability Date

Other countries have adopted CbC re-
porting requirements for annual account-
ing periods beginning on or after January
1, 2016, that would require reporting of
CbC information by constituent entities of
MNE groups with an ultimate parent en-
tity resident in a tax jurisdiction that does
not have a CbC reporting requirement for
the same annual accounting period. The
proposed regulations generally require
U.S. MNE groups to file a CbCR for tax-
able years beginning on or after the date
the final regulations are published. Conse-
quently, U.S. MNE groups that use a cal-
endar year as their taxable year generally
will not be required to file a CbCR for
their taxable year beginning January 1,

2016, and constituent entities of such U.S.
MNE groups may be subject to CbC re-
porting requirements in foreign jurisdic-
tions. Comments expressed concern about
this possibility and recommended various
approaches for dealing with this issue.
Most comments requested that the IRS
accept and exchange CbCRs voluntarily
filed for taxable years beginning on or
after January 1, 2016.

Consistent with the proposed regula-
tions, the final regulations are not appli-
cable for taxable years of ultimate parent
entities beginning before June 30, 2016,
the date of publication of the final regula-
tions in the Federal Register. Specifi-
cally, the final regulations apply to report-
ing periods of ultimate parent entities of
U.S. MNE groups that begin on or after
the first day of a taxable year of the ulti-
mate parent entity that begins on or after
June 30, 2016. The Treasury Department
and the IRS intend to allow ultimate par-
ent entities of U.S. MNE groups and U.S.
business entities designated by a U.S. ter-
ritory ultimate parent entity to file CbCRs
for reporting periods that begin on or after
January 1, 2016, but before the applica-
bility date of the final regulations, under a
procedure to be provided in separate,
forthcoming guidance. The Treasury De-
partment is working to ensure that foreign
jurisdictions implementing CbC reporting
requirements will not require constituent
entities of U.S. MNE groups to file a CbC
report with the foreign jurisdiction if
the U.S. MNE group files a CbCR with
the IRS pursuant to this procedure and the
CbCR is exchanged with such foreign ju-
risdiction pursuant to a competent author-
ity arrangement.

### 9. Time and Manner of Filing

The proposed regulations provide that
the CbCR for a taxable year must be filed
with the ultimate parent entity's income
tax return for the taxable year on or before
the due date, including extensions, for fil-
ing that person's income tax return. Mul-
tiple comments requested that taxpayers
be permitted to file a CbCR up to one year
from the end of the ultimate parent enti-
ty's taxable year or annual accounting pe-
riod to facilitate the taxpayer's ability to
use statutory accounts or tax records of
constituent entities to complete the CbCR.

After considering the flexibility allowed
for sources of information for completing
the CbCR, the IRS information technol-
ogy resources necessary to facilitate a fil-
ing separate from the income tax return,
and the IRS's concern that CbCRs be
linked to an income tax return, the Trea-
sury Department and the IRS have not
adopted this recommendation. However,
the final regulations do provide that Form
8975 may prescribe an alternative time
and manner for filing.

### 10. Employees

The proposed regulations provide that
the CbCR must reflect the number of em-
ployees for each tax jurisdiction of resi-
dence of the U.S. MNE group. The pro-
posed regulations also provide that
independent contractors participating in
the ordinary course of business of a con-
stituent entity may be included in the
number of full-time equivalent employ-
ees. Multiple comments asked for further
clarification with respect to the determi-
nation of the number of full-time equiva-
lent employees and the treatment of inde-
pendent contractors, including some
recommending that independent contrac-
tors not be included as employees. The
final regulations do not provide additional
guidance with respect to the meaning of
full-time equivalent employee or with re-
spect to independent contractor situations
and continue to allow for independent
contractors that participate in the ordinary
operating activities of a constituent entity
to be included in the number of full-time
equivalent employees. U.S. MNE groups
may determine the number of employees
of constituent entities on a full-time
equivalent basis using any reasonable ap-
proach that is consistently applied. The
Treasury Department and the IRS believe
permitting this flexibility in determining
the number of full-time equivalent em-
ployees of each constituent entity appro-
priately balances the burden of complet-
ing the CbCR with the anticipated benefits
to tax administration and is consistent
with the Final BEPS Report.

The proposed regulations specify that
employees should be reflected on the
CbCR in the tax jurisdictions in which the
employees performed work for the U.S.
MNE group. Comments indicated that this

methodology is inconsistent with the Final
BEPS Report, which provides that em-
ployees of a constituent entity should be
reflected in the tax jurisdiction of resi-
dence of such constituent entity, and that
determining the work location of employ-
ees would be burdensome for U.S. MNE
groups and would present issues regarding
certain employment situations with trav-
eling employees. The comments recom-
mended that the final regulations follow
the approach of the Final BEPS Report. In
response to these comments, the final reg-
ulations do not include the phrase "in the
relevant tax jurisdiction" from proposed
§ 1.6038-4(d)(2)(viii). Accordingly, un-
der the final regulations, employees of a
constituent entity are reflected in the tax
jurisdiction of residence of such constitu-
ent entity.

A comment requested clarification
about the tax jurisdiction in which em-
ployees of partnerships should be re-
flected on the CbCR. As discussed in sec-
tion 5 of this preamble, a partnership may
be considered a stateless entity. If the part-
nership creates a permanent establishment
for itself or its partners, then the permanent
establishment itself may be a constituent
entity of the U.S. MNE group. Employees
of the permanent establishment-constituent
entity should be reflected in the tax jurisdic-
tion of residence of the permanent establish-
ment. Any other employees of the partner-
ship should be reported on the stateless
jurisdiction row under the tax jurisdiction
of residence information portion of the
CbCR.

#### 11. Source of Data and Reconciliation

The proposed regulations provide that
the amounts furnished in the CbCR should
be furnished for the annual accounting
period with respect to which the ultimate
parent entity prepares its applicable finan-
cial statements ending with or within the
ultimate parent entity's taxable year, or, if
the ultimate parent entity does not prepare
applicable financial statements, then the
information may be based on the applica-
ble financial statements of constituent en-
tities for their accounting period that ends
with or within the ultimate parent entity's
taxable year. Multiple comments ex-
pressed concern that the description of the
period covered by the CbCR in the pro-

posed regulations may limit the flexibility
of U.S. MNE groups to choose to use
consolidated financial statements or sepa-
rate accounting, regulatory, or tax records
prepared for the constituent entities. To
mitigate this concern, the final regulations
remove the restrictions imposed by the
proposed regulations with respect to pro-
viding information for the applicable ac-
counting period of the ultimate parent en-
tity or for the applicable accounting
period of each constituent entity. The final
regulations provide that the reporting pe-
riod covered by Form 8975 is the period
of the ultimate parent entity's annual ap-
plicable financial statement that ends with
or within the ultimate parent entity's tax-
able year, or, if the ultimate parent entity
does not prepare an annual applicable fi-
nancial statement, then the ultimate parent
entity's taxable year. The final regulations
do not limit the constituent entity infor-
mation to applicable financial statements
of the constituent entity but, rather, pro-
vide that the source of the tax jurisdiction
of residence information on the CbCR
must be based on applicable financial
statements, books and records, regulatory
financial statements, or records used for
tax reporting or internal management con-
trol purposes for an annual period of each
constituent entity ending with or within
the reporting period.

The proposed regulations provide that
the amounts provided in the CbCR should
be based on applicable financial state-
ments, books and records maintained with
respect to the constituent entity, or records
used for tax reporting purposes. The term
"books and records" was intended to be
broad enough to include all sources of
information that the Final BEPS Report
allows. In order to clarify this intent, the
final regulations provide that the source of
data may also include regulatory financial
statements and records used for internal
management control purposes.

The proposed regulations state that it is
not necessary to have or maintain records
that reconcile the amounts provided on the
CbCR to the consolidated financial state-
ments of the U.S. MNE group or to the tax
returns filed in any particular tax jurisdic-
tion or to make adjustments for differ-
ences in accounting principles applied
from tax jurisdiction to tax jurisdiction.
Multiple comments recommended that

reconciliation to tax accounts be required
and that ultimate parent entities maintain
records of the reconciliation, while other
comments supported the approach in the
proposed regulations, which does not re-
quire reconciliation. The Treasury Depart-
ment and the IRS considered these com-
ments, and, consistent with the proposed
regulations, the final regulations do not
require the ultimate parent entity to create
and maintain records to reconcile the in-
formation reported in the CbCR to con-
solidated financial statements or to tax
returns. This approach provides flexibility
for U.S. MNE groups to use the available
data for each constituent entity without
imposing the potential burden of a need to
reconcile information on the CbCR with
accounts that may not even be finalized
when the CbCR is compiled, and it is
consistent with the Final BEPS Report.
The affirmative statement in the final reg-
ulations that an ultimate parent entity is
not required to create and maintain infor-
mation to support a reconciliation does
not, however, affect the requirement to
maintain records to support the informa-
tion provided in the CbCR.

#### 12. Expanding Scope and Surrogate Parent Entity Filing

The proposed regulations generally re-
quire a U.S. business entity that is an
ultimate parent entity of a U.S. MNE
group to file a CbCR with respect to busi-
ness entities that are or would be consol-
idated with the ultimate parent entity. A
CbCR is not required for an MNE group
that does not have a U.S. business entity
as its ultimate parent entity. Multiple com-
ments requested that reporting be required
for any U.S. entity that exercises the
"mind and management function" of an
MNE group, the foreign parent entity of
which is tax resident in a jurisdiction that
does not require a report similar to the
CbCR, despite the fact that the foreign
entities of such MNE group are not con-
trolled foreign corporations. This recom-
mendation, which is not adopted, is be-
yond the scope of the Final BEPS Report
and could not be implemented under the
authority provided in section 6038 to col-
lect information on foreign business enti-
ties owned by U.S. persons.

One comment recommended that the
final regulations allow a foreign-parented
MNE group with a U.S. business entity to
designate that U.S. business entity as a
surrogate parent entity and allow that en-
tity to file a CbCR with the IRS for pur-
poses of satisfying the MNE group's
country-by-country reporting obligations
in other tax jurisdictions. In light of the
IRS resources that would be required to
adopt this recommendation, the final reg-
ulations do not permit surrogate parent
entity filing in the United States by for-
eign corporations as a general matter.
However, the final regulations provide
that a U.S. territory ultimate parent entity
may designate a U.S. business entity that
it controls (as defined in section 6038(e))
to file on the U.S. territory ultimate parent
entity's behalf the CbCR that the U.S.
territory ultimate parent entity would be
required to file if it were a U.S. business
entity. A U.S. territory ultimate parent
entity is a business entity organized in a
U.S. territory or possession of the United
States that controls (as defined in section
6038(e)) a U.S. business entity and that is
not owned directly or indirectly by an-
other business entity that consolidates the
accounts of the U.S. territory ultimate par-
ent entity with its accounts under GAAP
in the other business entity's tax jurisdic-
tion of residence, or would be so required
if equity interests in the other business
entity were traded on a public securities
exchange in its tax jurisdiction of resi-
dence.

### 13. Tax Jurisdiction of Residence and Fiscal Autonomy

The proposed regulations provide rules
for determining the tax jurisdiction of res-
idence of a constituent entity. Under those
rules, a business entity is considered a
resident in a tax jurisdiction if, under the
laws of that tax jurisdiction, the business
entity is liable to tax therein based on
place of management, place of organiza-
tion, or another similar criterion. The pro-
posed regulations further provide that "a
business entity will not be considered a
resident in a tax jurisdiction if such busi-
ness entity is liable to tax in such tax
jurisdiction solely with respect to income
from sources in such tax jurisdiction, or
capital situated in such tax jurisdiction."

Multiple comments requested that the fi-
nal regulations clarify that this language
in the proposed regulations is not intended
to exclude the possibility of a country
with a purely territorial tax regime being a
tax jurisdiction of residence. The Treasury
Department and the IRS did not intend for
the proposed regulations to be interpreted
to treat all entities in tax jurisdictions with
territorial tax regimes as stateless entities.
The language in question was intended to
indicate that a business entity will not
have a tax jurisdiction of residence in a
jurisdiction solely by reason of being lia-
ble to tax in the jurisdiction on fixed,
determinable, annual or periodical income
from sources or capital situated in the
jurisdiction. For greater clarity, the final
regulations provide that "[a] business en-
tity will not be considered a resident in a
tax jurisdiction if the business entity is
only liable to tax in such tax jurisdiction
by reason of a tax imposed by reference to
gross amounts of income without any re-
duction for expenses, provided such tax
applies only with respect to income from
sources in such tax jurisdiction or capital
situated in such tax jurisdiction."

The proposed regulations provide that
a tax jurisdiction is a country or a juris-
diction that is not a country but that has
fiscal autonomy. Multiple comments re-
quested that the final regulations address
the meaning of fiscal autonomy. In light of
the need for consistency of CbC reporting
requirements across tax jurisdictions, the
Treasury Department and the IRS do not
believe it would be helpful to provide a
general definition of fiscal autonomy in
the final regulations absent international
consensus on the meaning of the term.
However, the final regulations clarify that
a U.S. territory or possession of the
United States, defined as American Sa-
moa, Guam, the Northern Mariana Is-
lands, Puerto Rico, or the U.S. Virgin
Islands, is considered to have fiscal auton-
omy for purposes of CbC reporting.

Under the proposed regulations, if a
business entity is resident in more than
one tax jurisdiction and there is no appli-
cable income tax treaty, the business en-
tity's tax jurisdiction of residence is the
tax jurisdiction of the business entity's
place of effective management deter-
mined in accordance with Article 4 of the
OECD Model Tax Convention. One com-

ment noted that the "effective place of
management" test under the OECD Model
Tax Convention can be uncertain and
"subject to second guessing." The com-
ment recommended that an alternative,
bright-line tie-breaker rule be considered
to address such situations. The determina-
tion of tax jurisdiction of residence in the
proposed regulations is based on the Final
BEPS Report, and the final regulations do
not create a new tie-breaker rule but add
that, in addition to the OECD Model Tax
Convention, Form 8975 may provide
guidance.

Although certain entities may not have
a tax jurisdiction of residence, the Trea-
sury Department and the IRS have deter-
mined that an entity regarded as a corpo-
ration should not be considered stateless
merely because it is organized or managed
in a jurisdiction that does not impose an
income tax on corporations. Accordingly,
the final regulations provide that in the
case of a tax jurisdiction that does not
impose an income tax on corporations, a
corporation that is organized or managed
in that tax jurisdiction will be treated as
resident in that tax jurisdiction, unless
such corporation is treated as resident in
another tax jurisdiction under another pro-
vision of the final regulations.

### 14. Reporting Threshold

The revenue threshold at or above
which a U.S. MNE group is required to
file the CbCR (reporting threshold) is ex-
pressed in United States dollars (USD) in
proposed § 1.6038-4(h). Foreign jurisdic-
tions that are enacting CbC reporting re-
quirements based on the Final BEPS Re-
port may express the reporting threshold
in a foreign currency. Multiple comment-
ers expressed concern that U.S. MNE
groups may be required to file a CbC
report in a foreign country, even if the
USD reporting threshold in § 1.6038-
4(h) is not exceeded, because the U.S.
MNE group's revenues exceed the local
law reporting threshold as expressed in
the foreign currency. The comments rec-
ommended various approaches to address
the possibility of a reporting threshold in
the final regulations that is inconsistent
with local law reporting thresholds. The
reporting threshold of $850,000,000 in the
proposed regulation was determined by

reference to the USD equivalent of
€750,000,000 on January 1, 2015, as pro-
vided in the Final BEPS Report. The Trea-
sury Department and the IRS anticipate
that other countries will acknowledge that
it would be inconsistent with the Final
BEPS Report for a country to require local
filing by a constituent entity of a U.S.
MNE group that has revenue of less than
$850,000,000.

Multiple comments requested that the
reporting threshold be reduced to the USD
equivalent of €40,000,000 in order to sub-
ject a greater number of U.S. MNE groups
to CbC reporting requirements. Because
the reporting threshold in the proposed
regulations is based on the Final BEPS
Report, it is consistent with the agreed
international standard with respect to CbC
reporting. The Treasury Department and
IRS weighed the potential benefit of ob-
taining CbC information on a larger num-
ber of U.S. MNE groups against the addi-
tional administrative burden that would be
imposed on the IRS and the burden that
would be imposed on U.S. MNE groups
that would not otherwise be required to file
the CbCR. Based on these considerations,
the final regulations maintain the reporting
threshold in the proposed regulations.

### 15. Confidentiality and Use of the CbCR

Multiple comments expressed con-
cerns regarding the confidentiality of the
CbCR. Some comments recommended
public disclosure of CbCRs. These com-
ments requested that the CbCR be treated
as a Treasury report, referencing as an
example the Treasury Department's Fi-
nancial Crimes Enforcement Network Re-
port of Foreign Bank and Financial As-
sets, rather than tax return information, so
that the CbCR would not be subject to the
confidentiality protections under section
6103. Other comments supported the deci-
sion to treat CbCR as return information.

The Treasury Department and the IRS
have determined that the information pro-
vided on the CbCR is return information
subject to the confidentiality protections
of section 6103. This approach is consis-
tent with the purpose of CbC reporting as
well as the confidentiality standards re-
flected in the Final BEPS Report. CbC
reporting was designed and established as
part of an international effort to standard-

ize transfer pricing documentation. This
standardized documentation is intended to
provide an efficient and effective means for
tax administrations to conduct high-level
transfer pricing risk assessment. Accord-
ingly, the Treasury Department and the IRS
are collecting the CbCR under the authority
of sections 6001, 6011, 6012, 6031, and
6038 to assist in the better enforcement of
income tax laws. The CbCR is a return, and
the information furnished to the Treasury
Department and the IRS on the CbCR is
return information subject to the confidenti-
ality protections provided under section
6103. In addition, the Final BEPS Report
provides that tax administrations should
take all reasonable steps to ensure that there
is no public disclosure of confidential infor-
mation in CbC reports and that they be used
for tax risk assessment purposes.

The preamble of the proposed regula-
tions indicates that the information reported
on the CbCR will be used for high-level
transfer pricing risk identification and as-
sessment, and that transfer pricing adjust-
ments will not be made solely on the basis
of a CbCR, but that the CbCR may be the
basis for further inquiries into transfer pric-
ing practices or other tax matters which may
lead to adjustments. Some comments sup-
ported the limitations on use of the CbCR
information, while other comments ex-
pressed concern that a prohibition on disclo-
sure of the CbCR for non-tax law purposes
is too restrictive. Consistent with the pro-
posed regulations, the final regulations do
not contain specific limitations on the use of
CbCR information. However, consistent
with the Final BEPS Report, the Treasury
Department and the IRS intend to limit the
use of the CbCR information and intend to
incorporate this limitation into the compe-
tent authority arrangements pursuant to
which CbCRs are exchanged.

One comment recommended that CbCR
information not be provided to state or local
jurisdictions and that a statement to that
effect be provided in the final regulations.
Under section 6103(d), return information
may be provided to state agencies, but
only for the purposes of, and only to the
extent necessary in, the administration of
such state's tax laws. The Treasury Depart-
ment and the IRS believe the circumstances
under which this standard would be met for
the CbCR are rare, but the final regulations
do not preclude the disclosure of CbCRs to

state agencies, subject to the restrictions of
section 6103 that apply to other returns and
return information.

### 16. Exchange of Information with Foreign Jurisdictions

The United States intends to enter into
competent authority arrangements for the
automatic exchange of CbCRs with juris-
dictions with which the United States has
an income tax treaty or tax information
exchange agreement. Multiple comments
expressed concern that review of the con-
fidentiality safeguards and framework of
the other jurisdictions would prevent the
Treasury Department and IRS from con-
cluding such arrangements on a timely
basis. Comments also requested that the
Treasury Department and IRS publish a
list of jurisdictions with which the United
States exchanges CbCRs. The Treasury
Department is committed to entering into
bilateral competent authority arrange-
ments with respect to CbCRs in a timely
manner, taking into consideration the need
for appropriate review of systems and
confidentiality safeguards in the other ju-
risdictions. The Treasury Department and
the IRS anticipate that information about
the existence of competent authority ar-
rangements for CbCRs will be made pub-
licly available, but the manner in which
such information would be made publicly
available has not yet been determined.

A comment recommended that the final
regulations provide a mechanism for report-
ing suspected violations of the limitations
on the use of information by foreign juris-
dictions. While the final regulations do not
provide procedures for reporting suspected
violations, the Treasury Department and the
IRS are aware of the concern and intend to
establish a procedure to report suspected
violations of confidentiality and other mis-
uses of CbCR information.

A comment requested that information
transmitted under the competent authority
arrangements include the "Additional In-
formation" table in the model CbC report
template provided in the Final BEPS Re-
port. It is expected that such information
will be collected on Form 8975 and trans-
mitted; however, there may be limits to
the amount of information that can be
transmitted in any field. Such constraints,

if any, will be noted in the Instructions to
Form 8975.

### 17. Penalties

One comment requested that penalties
with respect to the CbCR be waived for
reports filed for the 2016 tax year and that
the Treasury Department should advocate
that other countries also waive penalties
for the 2016 tax year. The final regulations
apply to reporting periods of ultimate par-
ent entities that begin on or after the first
day of a taxable year of the ultimate par-
ent entity that begins on or after publica-
tion of the final regulations in the Federal
Register. U.S. MNE groups whose ulti-
mate parent entity's taxable year begins
before the applicability date will not have
a CbCR filing requirement for their tax
year beginning in 2016. The final regula-
tions do not provide a specific waiver of
penalties for U.S. MNE groups whose ul-
timate parent entity's taxable year begins
on or after the applicability date. The pen-
alty rules under section 6038 generally
apply, including reasonable cause relief
for failure to file.

### Special Analyses

Certain IRS regulations, including
these, are exempt from the requirements
of Executive Order 12866, as supple-
mented and reaffirmed by Executive Or-
der 13563. Therefore, a regulatory impact
assessment is not required. It also has
been determined that section 553(b) and
(d) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
regulations.

It is hereby certified that this regulation
will not have a significant economic im-
pact on a substantial number of small en-
tities within the meaning of section 601(6)
of the Regulatory Flexibility Act (5
U.S.C. chapter 6). Accordingly, a regula-
tory flexibility analysis is not required.
This certification is based on the fact that
these regulations will only affect U.S. cor-
porations, partnerships, and business
trusts that have foreign operations with
respect to a taxable year when the com-
bined annual revenue of the business en-
tities owned by the U.S. person meets or
exceeds $850,000,000 for the previous re-
porting period. Pursuant to section 7805(f)
of the Internal Revenue Code, the notice

of proposed rulemaking preceding this
regulation was submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.

### Drafting Information

The principal author of these regula-
tions is Melinda E. Harvey of the Office of
Associate Chief Counsel (International).
However, other personnel from the IRS
and the Treasury Department participated
in their development.

* * * * *

### Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 1 is
amended as follows:

### PART 1-INCOME TAXES

Paragraph 1. The authority citation for
part 1 is amended by adding the following
entry in numerical order to read in part as
follows:

Authority: 26 U.S.C. 7805

*****

Section 1.6038-4 also issued under 26
U.S.C. 6001, 6011, 6012, 6031, and 6038.
*****

Par. 2. Section 1.6038-4 is added to
read as follows:

§ 1.6038-4 Information returns
required of certain United States
persons with respect to such person's
U.S. multinational enterprise group.

(a) Requirement of return. Except as
provided in paragraph (h) of this section,
every ultimate parent entity of a U.S. mul-
tinational enterprise (MNE) group must
make an annual return on Form 8975,
Country-by-Country Report, setting forth
the information described in paragraph (d)
of this section, and any other information
required by Form 8975, with respect to the
reporting period described in paragraph
(c) of this section.

(b) Definitions-(1) Ultimate parent
entity of a U.S. MNE group. An ultimate
parent entity of a U.S. MNE group is a
U.S. business entity that:

(i) Owns directly or indirectly a suffi-
cient interest in one or more other
business entities, at least one of which

is organized or tax resident in a tax
jurisdiction other than the United
States, such that the U.S. business entity
is required to consolidate the accounts
of the other business entities with its
own accounts under U.S. generally ac-
cepted accounting principles, or would
be so required if equity interests in the
U.S. business entity were publicly traded
on a U.S. securities exchange; and

(ii) Is not owned directly or indirectly by
another business entity that consoli-
dates the accounts of such U.S. busi-
ness entity with its own accounts un-
der generally accepted accounting
principles in the other business enti-
ty's tax jurisdiction of residence, or
would be so required if equity inter-
ests in the other business entity were
traded on a public securities exchange
in its tax jurisdiction of residence.

(2) Business entity. For purposes of this
section, a business entity generally is any
entity recognized for federal tax purposes
that is not properly classified as a trust under
§ 301.7701-4 of this chapter. However, any
grantor trust within the meaning of section
671, all or a portion of which is owned by a
person other an individual, is a business
entity for purposes of this section. Addition-
ally, the term business entity includes any
entity with a single owner that may be dis-
regarded as an entity separate from its
owner under § 301.7701-3 of this chapter
and a permanent establishment, as defined
in paragraph (b)(3) of this section, that pre-
pares financial statements separate from
those of its owner for financial reporting,
regulatory, tax reporting, or internal man-
agement control purposes. A business entity
does not include a decedent's estate or a
bankruptcy estate described in section 1398.

(3) Permanent establishment. For pur-
poses of this section, the term permanent
establishment includes:

(i) A branch or business establishment of a
constituent entity in a tax jurisdiction
that is treated as a permanent establish-
ment under an income tax convention
to which that tax jurisdiction is a party;

(ii) A branch or business establishment of
a constituent entity that is liable to tax
in the tax jurisdiction in which it is
located pursuant to the domestic law
of such tax jurisdiction; or

(iii) A branch or business establishment
of a constituent entity that is treated in

the same manner for tax purposes as an
entity separate from its owner by the
owner's tax jurisdiction of residence.

(4) U.S. business entity. A U.S. busi-
ness entity is a business entity that is
organized or has its tax jurisdiction of
residence in the United States. For purposes
of this section, foreign insurance companies
that elect to be treated as domestic corpora-
tions under section 953(d) are U.S. business
entities that have their tax jurisdiction of
residence in the United States.

(5) U.S. MNE group. A U.S. MNE
group comprises the ultimate parent entity
of a U.S. MNE group as defined in para-
graph (b)(1) of this section and all of the
business entities required to consolidate
their accounts with the ultimate parent
entity's accounts under U.S. generally ac-
cepted accounting principles, or that
would be so required if equity interests in
the ultimate parent entity were publicly
traded on a U.S. securities exchange, re-
gardless of whether any such business en-
tities could be excluded from consolida-
tion solely on size or materiality grounds.

(6) Constituent entity. With respect to a
U.S. MNE group, a constituent entity is
any separate business entity of such U.S.
MNE group, except that the term constit-
uent entity does not include a foreign cor-
poration or foreign partnership for which
the ultimate parent entity is not required to
furnish information under section 6038(a)
(determined without regard to §§ 1.6038-
2(j) and 1.6038-3(c)) or any permanent
establishment of such foreign corporation
or foreign partnership.

(7) Tax jurisdiction. For purposes of
this section, a tax jurisdiction is a country
or a jurisdiction that is not a country but
that has fiscal autonomy. For purposes of
this section, a U.S. territory or possession
of the United States is considered to have
fiscal autonomy.

(8) Tax jurisdiction of residence. A
business entity is considered a resident in
a tax jurisdiction if, under the laws of that
tax jurisdiction, the business entity is lia-
ble to tax therein based on place of man-
agement, place of organization, or another
similar criterion. A business entity will
not be considered a resident in a tax juris-
diction if the business entity is liable to
tax in such tax jurisdiction only by reason
of a tax imposed by reference to gross
amounts of income without any reduction

for expenses, provided such tax applies
only with respect to income from sources
in such tax jurisdiction or capital situated
in such tax jurisdiction. If a business entity
is resident in more than one tax jurisdiction,
then the applicable income tax convention
rules, if any, should be applied to determine
the business entity's tax jurisdiction of res-
idence. If a business entity is resident in
more than one tax jurisdiction and no appli-
cable income tax convention exists between
those tax jurisdictions, or if the applicable
income tax convention provides that the de-
termination of residence is based on a de-
termination by the competent authorities of
the relevant tax jurisdictions and no such
determination has been made, the business
entity's tax jurisdiction of residence is the
tax jurisdiction of the business entity's place
of effective management determined in ac-
cordance with Article 4 of the Organisation
for Economic Co-operation and Develop-
ment Model Tax Convention on Income and
on Capital 2014, or as provided by Form
8975. A corporation that is organized or
managed in a tax jurisdiction that does not
impose an income tax on corporations will
be treated as resident in that tax jurisdiction,
unless such corporation is treated as resident
in another tax jurisdiction under another
provision of this section. The tax jurisdic-
tion of residence of a permanent establish-
ment is the jurisdiction in which the perma-
nent establishment is located. If a business
entity does not have a tax jurisdiction of
residence, then solely for purposes of para-
graph (b)(1) of this section, the tax jurisdic-
tion of residence is the business entity's
country of organization.

(9) Applicable financial statements. An
applicable financial statement is a certified
audited financial statement that is accom-
panied by a report of an independent cer-
tified public accountant or similarly qual-
ified independent professional that is used
for purposes of reporting to shareholders,
partners, or similar persons; for purposes
of reporting to creditors in connection
with securing or maintaining financing; or
for any other substantial non-tax purpose.

(10) U.S. territory or possession of the
United States. The term U.S. territory or
possession of the United States means
American Samoa, Guam, the Northern
Mariana Islands, Puerto Rico, or the U.S.
Virgin Islands.

(11) U.S. territory ultimate parent en-
tity. A U.S. territory ultimate parent entity
is a business entity organized in a U.S.
territory or possession of the United States
that controls (as defined in section
6038(e)) a U.S. business entity and that is
not owned directly or indirectly by an-
other business entity that consolidates the
accounts of the U.S. territory ultimate par-
ent entity with its accounts under gener-
ally accepted accounting principles in the
other business entity's tax jurisdiction of
residence, or would be so required if eq-
uity interests in the other business entity
were traded on a public securities ex-
change in its tax jurisdiction of residence.

(c) Reporting period. The reporting pe-
riod covered by Form 8975 is the period
of the ultimate parent entity's applicable
financial statement prepared for the 12-
month period (or a 52-53 week period
described in section 441(f)) that ends with
or within the ultimate parent entity's tax-
able year. If the ultimate parent entity
does not prepare an annual applicable fi-
nancial statement, then the reporting pe-
riod covered by Form 8975 is the 12-
month period (or a 52-53 week period
described in section 441(f)) that ends on
the last day of the ultimate parent entity's
taxable year.

(d) Contents of return-(1) Constituent
entity information. The return on Form
8975 must contain so much of the follow-
ing information with respect to each con-
stituent entity of the U.S. MNE group, and
in such form or manner, as Form 8975
prescribes:

(i) The complete legal name of the con-
stituent entity;

(ii) The tax jurisdiction, if any, in which
the constituent entity is resident for
tax purposes;

(iii) The tax jurisdiction in which the con-
stituent entity is organized or incor-
porated (if different from the tax ju-
risdiction of residence);

(iv) The tax identification number, if any,
used for the constituent entity by the
tax administration of the constituent en-
tity's tax jurisdiction of residence; and

(v) The main business activity or activi-
ties of the constituent entity.

(2) Tax jurisdiction of residence infor-
mation. The return on Form 8975 must
contain so much of the following informa-
tion with respect to each tax jurisdiction in

which one or more constituent entities of a
U.S. MNE group is resident, presented as
an aggregate of the information for the
constituent entities resident in each tax
jurisdiction, and in such form or manner,
as Form 8975 prescribes:

(i) Revenues generated from transac-
tions with other constituent entities;

(ii) Revenues not generated from trans-
actions with other constituent entities;

(iii) Profit or loss before income tax;

(iv) Total income tax paid on a cash
basis to all tax jurisdictions, and
any taxes withheld on payments re-
ceived by the constituent entities;

(v) Total accrued tax expense recorded
on taxable profits or losses, reflecting
only operations in the relevant annual
period and excluding deferred taxes or
provisions for uncertain tax liabilities;

(vi) Stated capital, except that the stated
capital of a permanent establish-
ment must be reported in the tax
jurisdiction of residence of the legal
entity of which it is a permanent
establishment unless there is a de-
fined capital requirement in the per-
manent establishment tax jurisdic-
tion for regulatory purposes;

(vii) Total accumulated earnings, except
that accumulated earnings of a per-
manent establishment must be re-
ported by the legal entity of which it
is a permanent establishment;

(viii) Total number of employees on a
full-time equivalent basis; and

(ix) Net book value of tangible assets,
which, for purposes of this section,
does not include cash or cash equiv-
alents, intangibles, or financial assets.

(3) Special rules-(i) Constituent en-
tity with no tax jurisdiction of residence.
The information listed in paragraph (d)(2)
of this section also must be provided, in
the aggregate, for any constituent entity or
entities that have no tax jurisdiction of
residence. In addition, if a constituent en-
tity is an owner of a constituent entity that
does not have a jurisdiction of tax resi-
dence, then the owner's share of such
entity's revenues and profits will be ag-
gregated with the information for the
owner's tax jurisdiction of residence.

(ii) Definition of revenue. For purposes
of this section, the term revenue includes all
amounts of revenue, including revenue from
sales of inventory and property, services,

royalties, interest, and premiums. The term
revenue does not include payments received
from other constituent entities that are
treated as dividends in the payor's tax juris-
diction of residence. Distributions and re-
mittances from partnerships and other fis-
cally transparent entities and permanent
establishments that are constituent entities
are not considered revenue of the recipient-
owner. The term revenue also does not in-
clude imputed earnings or deemed divi-
dends received from other constituent
entities that are taken into account solely for
tax purposes and that otherwise would be
included as revenue by a constituent entity.
With respect to a constituent entity that is an
organization exempt from taxation under
section 501(a) because it is an organization
described in section 501(c), 501(d), or
401(a), a state college or university de-
scribed in section 511(a)(2)(B), a plan de-
scribed in section 403(b) or 457(b), an indi-
vidual retirement plan or annuity as defined
in section 7701(a)(37), a qualified tuition
program described in section 529, a quali-
fied ABLE program described in section
529A, or a Coverdell education savings ac-
count described in section 530, the term
revenue includes only revenue that is re-
flected in unrelated business taxable income
as defined in section 512.

(iii) Number of employees. For pur-
poses of this section, the number of em-
ployees on a full-time equivalent basis may
be reported as of the end of the accounting
period, on the basis of average employment
levels for the annual accounting period, or
on any other reasonable basis consistently
applied across tax jurisdictions and from
year to year. Independent contractors partic-
ipating in the ordinary operating activities of
a constituent entity may be reported as em-
ployees of such constituent entity. Reason-
able rounding or approximation of the num-
ber of employees is permissible, provided that
such rounding or approximation does not ma-
terially distort the relative distribution of em-
ployees across the various tax jurisdictions.
Consistent approaches should be applied from
year to year and across entities.

(iv) Income tax paid and accrued tax
expense of permanent establishment. In
the case of a constituent entity that is a
permanent establishment, the amount of
income tax paid and the amount of ac-
crued tax expense referred to in para-
graphs (d)(2)(iv) and (v) of this section

should not include the income tax paid or
tax expense accrued by the business entity
of which the permanent establishment
would be a part, but for the second sen-
tence of paragraph (b)(2) of this section,
in that business entity's tax jurisdiction of
residence on the income derived by the
permanent establishment.

(v) Certain transportation income. If a
constituent entity of a U.S. MNE group
derives income from international trans-
portation or transportation in inland wa-
terways that is covered by income tax
convention provisions that are specific to
such income and under which the taxing
rights on such income are allocated exclu-
sively to one tax jurisdiction, then the U.S.
MNE group should report the information
required under paragraph (d)(2) of this
section with respect to such income for
the tax jurisdiction to which the relevant
income tax convention provisions allocate
these taxing rights.

(e) Reporting of financial amounts-
(1) Reporting in U.S. dollars required. All
amounts furnished under paragraph (d)(2)
of this section, other than paragraph
(d)(2)(viii) of this section, must be ex-
pressed in U.S. dollars. If an exchange
rate is used other than in accordance with
U.S. generally accepted accounting prin-
ciples for conversion to U.S. dollars, the
exchange rate must be indicated.

(2) Sources of financial amounts. All
amounts furnished under paragraph (d)(2)
of this section, other than paragraph
(d)(2)(viii) of this section, should be based
on applicable financial statements, books
and records maintained with respect to the
constituent entity, regulatory financial state-
ments, or records used for tax reporting or
internal management control purposes for
an annual period of each constituent entity
ending with or within the period described
in paragraph (c) of this section.

(f) Time and manner for filing. Returns
on Form 8975 required under paragraph (a)
of this section for a reporting period must be
filed with the ultimate parent entity's in-
come tax return for the taxable year, in or
with which the reporting period ends, on or
before the due date (including extensions)
for filing that person's income tax return or
as otherwise prescribed by Form 8975.

(g) Maintenance of records. The U.S.
person filing Form 8975 as an ultimate
parent entity of a U.S. MNE group must

maintain records to support the informa-
tion provided on Form 8975. However,
the U.S. person is not required to create
and maintain records that reconcile the
amounts provided on Form 8975 with the
tax returns of any tax jurisdiction or ap-
plicable financial statements.

(h) Exceptions to furnishing informa-
tion. An ultimate parent entity of a U.S.
MNE group is not required to report in-
formation under this section for the re-
porting period described in paragraph (c)
of this section if the annual revenue of the
U.S. MNE group for the immediately pre-
ceding reporting period was less than
$850,000,000.

(i) [Reserved]

(j) U.S. territories and possessions of
the United States. A U.S. territory ulti-
mate parent entity may designate a U.S.
business entity that it controls (as defined
in section 6038(e)) to file Form 8975 on
the U.S. territory ultimate parent entity's
behalf with respect to such U.S. territory
ultimate parent entity and the business
entities that would be required to consol-
idate their accounts with such U.S. terri-
tory ultimate parent entity under U.S. gen-
erally accepted accounting principles, or
would be so required if equity interests in
the U.S. territory ultimate parent entity
were publicly traded on a U.S. securities
exchange.

(k) Applicability dates. The rules of this
section apply to reporting periods of ulti-
mate parent entities of U.S. MNE groups
that begin on or after the first day of a
taxable year of the ultimate parent entity that
begins on or after June 30, 2016.

John Dalrymple,
Deputy Commissioner for
Services and Enforcement.

Approved: June 20, 2016.

Mark J. Mazur.
Assistant Secretary of the
Treasury (Tax Policy).

(Filed by the Office of the Federal Register on June 29,
2016, 8:45 a.m., and published in the issue of the Federal
Register for June 30, 2016, 81 F.R. 42482.)

## Part III. Administrative, Procedural, and Miscellaneous

### Proposed Qualified Intermediary Agreement Notice 2016-42

#### SECTION 1. PURPOSE

This Notice sets forth the proposed
qualified intermediary (QI) withholding
agreement (QI agreement) entered into
under § 1.1441-1(e)(5).1 In general, the
QI agreement allows foreign persons to
enter into an agreement with the Internal
Revenue Service (IRS) to simplify their
obligations as a withholding agent under
chapters 3 and 4 and as a payor under
chapter 61 and section 3406 for amounts
paid to their account holders.

The QI agreement currently in effect,
as provided in Rev. Proc. 2014-39,
2014-29 I.R.B. 150, (the 2014 QI agree-
ment), expires on December 31, 2016.
The proposed changes to the QI agree-
ment described in this Notice, subject to
any modifications included in a revenue
procedure containing the final QI agree-
ment (to be issued later in 2016), will
apply to QI agreements that are in effect
on or after January 1, 2017, as provided in
section 5 of this Notice. Section 2 of this
Notice describes the highlights of the pro-
posed changes to the 2014 QI agreement
and provides a general description of cor-
responding changes that will be made to
the withholding foreign partnership agree-
ment (WP agreement) and withholding
foreign trust agreement (WT agreement),
the current versions of which were pub-
lished in Rev. Proc. 2014-47, 2014-35
I.R.B 393. Section 3 of this Notice pro-
vides the application procedures for be-
coming a QI and renewing a QI agree-
ment. Section 4 of this Notice provides the
proposed QI agreement. Comments with
respect to the proposed QI agreement are
requested by August 31, 2016.

## SECTION 2. HIGHLIGHTS OF CHANGES TO THE 2014 QI AGREEMENT

.01 Qualified Derivatives Dealers and
Section 871(m). On September 18, 2015,

final and temporary regulations under sec-
tion 871(m) and sections 1441, 1461, and
1473 (collectively, the 871(m) regula-
tions) were published in T.D. 9734 ad-
dressing the treatment of dividend equiv-
alents from U.S. sources. Section 871(m)
treats "dividend equivalent" payments as
U.S. source dividends for purposes of
chapters 3 and 4 and sections 871(a), 881,
and 4948(a). As a result, dividend equiv-
alent payments are amounts subject to
withholding (as defined in § 1.1441-2(a))
for purposes of sections 1441 through
1443 and withholdable payments (as de-
fined in § 1.1473-1(a)) for purposes of
sections 1471 and 1472. Accordingly, a
withholding agent generally is required to
deduct and withhold a tax equal to 30
percent on any dividend equivalent pay-
ment unless an exception from, or lower
rate of, withholding applies.

(A) In general. This Notice proposes
new provisions to the QI agreement that
will permit a QI that is an eligible entity to
act as a qualified derivatives dealer
(QDD) and provides the requirements and
obligations that will apply to a QDD.
When a QDD provides a valid withhold-
ing certificate to a withholding agent, the
withholding agent will not be required to
withhold on certain payments made to the
QDD when the QDD is acting as a prin-
cipal (that is, not as an intermediary). Un-
der the proposed QI agreement, these pay-
ments are payments with respect to
potential section 871(m) transactions (as
defined in § 1.871-15(a)(12)) and pay-
ments with respect to underlying securi-
ties (as defined in § 1.871-15(a)(15)). The
requirements and obligations applicable to
QDDs will be effective for QDDs when
they enter into QI agreements after the
proposed QI agreement in this Notice is
finalized (with effective dates on or after
January 1, 2017).

(B) Requirements and scope of QDD
status. To be a QDD, an entity must enter
into a QI agreement and be an eligible
entity. Pursuant to § 1.1441-1T(e)(6)(ii),
a QI is an "eligible entity" if it is one of
the three following types of entities: (1) a
dealer in securities that is subject to reg-

ulatory supervision as a dealer by a gov-
ernmental authority in the jurisdiction in
which it is organized or operates; (2) a
bank subject to regulatory supervision as a
bank by a governmental authority in the
jurisdiction in which it is organized or
operates and that issues potential section
871(m) transactions to customers and re-
ceives dividends or dividend equivalent
payments pursuant to potential section
871(m) transactions to hedge those trans-
actions issued to customers; or (3) an en-
tity that is wholly-owned by a bank sub-
ject to regulatory supervision as a bank by
a governmental authority in the jurisdic-
tion in which it is organized or operates
and that issues potential section 871(m)
transactions to customers and receives
dividends or dividend equivalent pay-
ments pursuant to potential section
871(m) transactions to hedge those trans-
actions issued to customers.

If a foreign branch of a U.S. financial
institution meets the requirements of an
eligible entity, the foreign branch may
enter into a QI agreement to act as a QDD.
That foreign branch will be permitted to
document and report recipients of those
payments in reporting pools consistent
with the provisions of sections 5 and 8 of
the proposed QI agreement and to use the
collective refund procedure, if otherwise
permitted under section 9.04 of the pro-
posed QI agreement.

Under the proposed QI agreement, a QI
may only act as a QDD for payments with
respect to potential section 871(m) trans-
actions or underlying securities that it re-
ceives and payments with respect to po-
tential section 871(m) transactions that it
makes as a principal, whether or not the
payments are received or made in its
dealer capacity. A QI that acts as a QDD
generally will be required to act as a QDD
for (a) all payments with respect to poten-
tial section 871(m) transactions and un-
derlying securities that it receives as a
principal, and (b) all payments with re-
spect to potential section 871(m) transac-
tions that it makes as a principal. How-
ever, to the extent the payment received
by a QI as a principal is treated as income

1Unless otherwise provided, all citations in this Notice and the QI agreement included in this Notice are to the Internal Revenue Code of 1986, as amended (Code) and to the Income Tax
Regulations thereunder.

effectively connected with QI's trade or
business in the United States, then the QI
is not allowed to act as a QDD for such
payment. Similarly, when a QI makes a
payment with respect to a potential sec-
tion 871(m) transaction that is a deduction
properly allocated to the QI's gross in-
come that is effectively connected with
the conduct of such trade or business
within the United States, that payment
may not be included in the QDD's offset-
ting payments (as described below) for
purposes of determining its "section
871(m) amount" (as defined in section
2.79 of the proposed QI Agreement and
described in section 2.01(D), below).

A QI, however, may not act as a QDD
when it receives or makes a payment with
respect to a potential section 871(m)
transaction as an intermediary as opposed
to as a principal (for example, when the
QI acts as a custodian of a structured note
with a payment referencing a dividend of
a domestic corporation). As a result, the
QI may, but is not required to, act as a QI
for those payments. The QI may treat the
payments in the same manner as it would
other withholdable payments or reportable
amounts it receives, and thus it may either
act as a QI (and choose whether or not to
assume primary withholding responsibil-
ity), or it may act as a nonqualified inter-
mediary (NQI) for such payments.

(C) Reporting and withholding respon-
sibilities of a QDD. When a QI acts as a
QDD, it must assume primary chapters 3
and 4 withholding responsibility and pri-
mary Form 1099 reporting and section
3406 backup withholding responsibility
for all payments made with respect to
potential section 871(m) transactions as a
principal. A QDD will be required to
withhold on the dividend payment date for
the applicable dividend. If a QDD makes
any payment with respect to a potential
section 871(m) transaction that is not a
dividend equivalent payment but is an
amount subject to chapter 3 or 4 withhold-
ing or a reportable payment, the QDD
must also assume primary chapters 3 and
4 withholding responsibility and primary
Form 1099 reporting and section 3406
backup withholding responsibility for all
of those payments. Under the proposed QI
agreement, a QDD's reporting responsi-
bilities also include specific payee (rather
than pooled) reporting on Form 1042-S,

Foreign Person's U.S. Source Income
Subject to Withholding, for payments to
other QDDs to which the QDD makes a
payment of an amount subject to chapter 3
withholding.

Among the other information reporting
obligations described in sections 7 and 8
of the proposed QI agreement, a QDD will
be required to report on separate Forms
1042-S the amount of qualifying dividend
equivalent offsetting payments (as defined
in section 2.70 of the proposed QI agree-
ment and described in section 2.01(D),
below) that represent (a) the aggregate
amount of payments made to a United
States person that would be dividend
equivalent payments if made to a person
who was not a United States person (as
described in section 2.70(A)(1) of the pro-
posed QI agreement); and (b) the aggre-
gate amount of payments of effectively
connected income (as described in section
2.70(A)(2) of the proposed QI agree-
ment). In addition, a QDD will be re-
quired to provide specific information (for
example, name, address, and U.S. TIN)
upon request of the IRS about U.S. non-
exempt recipients that receive qualifying
dividend equivalent offsetting payments
described in section 2.70(A)(1) of the pro-
posed QI agreement. To the extent neces-
sary, a QDD must obtain a waiver from
each U.S. non-exempt recipient described
in the preceding sentence of any limitation
on providing such information to the IRS.
If the QDD does not obtain a waiver or
collect and maintain such information
about a U.S. non-exempt recipient, any
payment made to that U.S. non-exempt
recipient is not a qualifying dividend
equivalent offsetting payment. A QI will
be required to report these payments in a
pool on a separate Form 1042-S. The
maintenance of such information by
QDDs will assist the IRS in ensuring the
compliance of these U.S. non-exempt re-
cipients with their reporting of income
associated with these transactions and of
QDDs with their obligations under the QI
agreement.

(D) Tax liability of a QDD. A QDD
(other than a foreign branch of a U.S.
financial institution acting as a QDD)
must determine and pay any "QDD tax
liability." A QDD tax liability is the sum
of a QDD's liability under sections 871(a)
and 881 for (a) its "section 871(m)

amount" (as defined in section 2.79 of the
proposed QI agreement); (b) its dividends
that are not on underlying securities asso-
ciated with potential section 871(m) trans-
actions and its dividend equivalent pay-
ments received as a QDD in its non-dealer
capacity; and (c) any other U.S. source
FDAP payments received as a QDD with
respect to potential section 871(m) trans-
actions or underlying securities that are
not dividend or dividend equivalent pay-
ments. For purposes of determining the
QDD tax liability, payments received by a
QDD acting as a proprietary trader are
treated as payments received in its non-
dealer capacity, while transactions prop-
erly reflected in a QDD's dealer book are
presumed to be held by a dealer in its
dealer capacity. For purposes of determin-
ing the QDD tax liability, dealer activity is
limited to its activity as a derivatives
dealer.

Even though a QDD may act as a QDD
for payments received in a non-dealer ca-
pacity, only payments made and received
in its dealer capacity may be used for
purposes of calculating its section 871(m)
amount. In its dealer capacity, a QDD
may hold underlying securities that are
associated with potential section 871(m)
transactions. An underlying security is as-
sociated with a potential section 871(m)
transaction when the QDD holds that un-
derlying security to manage the risk of
price changes with respect to a potential
section 871(m) transaction that the QDD
entered into in the normal course of its
business as a dealer. If a QDD holds stock
in its non-dealer capacity (for example, as
a proprietary trader), the QDD cannot
treat that stock as an underlying security
associated with a potential section 871(m)
transaction for purposes of calculating its
section 871(m) amount.

A QDD remains liable for tax on any
dividends and dividend equivalents it re-
ceives in its dealer capacity to the extent
the QDD is not contractually obligated to
make offsetting payments that reference
the same dividend or dividend equivalent
that it received as a dealer. To determine
its tax liability on dividends and dividend
equivalents that it receives, a QDD may
aggregate all dividends on underlying se-
curities associated with potential section
871(m) transactions and dividend equiva-
lent payments that it receives that refer-

ence the same dividend and all dividend
equivalent payments that it is contractu-
ally obligated to make as a dealer that
reference the same dividend. Transactions
properly reflected in a QDD's dealer book
are presumed to be held by the QDD in its
dealer capacity for purposes of determin-
ing the QDD's tax liability. The net
amount of the payments received and the
offsetting payments made is referred to as
the QDD's "section 871(m) amount." See
section 2.79 of the proposed QI agree-
ment. Under the proposed QI agreement,
the amount of offsetting payments in-
cludes any dividend equivalent payment
and any qualifying dividend equivalent
offsetting payment that the QDD makes or
is contractually obligated to make with
respect to the same dividend. A "qualify-
ing dividend equivalent offsetting pay-
ment" is defined in section 2.70 of the
proposed QI agreement as (a) any pay-
ment made or contractually obligated to
be made to a United States person that
would be a dividend equivalent payment
if made to a person who was not a United
States person and (b) any payment made
to a foreign person that would be a divi-
dend equivalent payment if the payment
were not treated as income effectively
connected with the conduct of a U.S. trade
or business. As discussed in section
2.01(C), above, to the extent a QDD does
not obtain a waiver from a U.S. non-
exempt recipient of a payment described
in (a) in the preceding sentence of any
limitation on providing its name, address,
and TIN (if any) to the IRS and does not
collect and maintain such information,
payments made to that U.S. non-exempt
recipient are not qualifying dividend
equivalent offsetting payments.

A QDD will report its QDD tax liabil-
ity on a Form 1042, Annual Withholding
Tax Return for U.S. Source Income of
Foreign Persons. The QDD's payment
and deposit requirements with respect to
any taxes due with respect to its QDD tax
liability on Form 1042 are described in
sections 3.08 and 3.09(C) of the proposed
QI agreement. When a foreign branch of a
U.S. financial institution acts as a QDD,
the branch is not required to report a QDD
tax liability for income relating to poten-
tial section 871(m) transactions and un-
derlying securities on Form 1042. Instead,
the U.S. financial institution must file the

appropriate U.S. income tax return (for
example, Form 1120, U.S. Corporation
Income Tax Return) for the tax year cov-
ered by the QI agreement to report and
pay its tax liability under chapter 1.

(E) Accounts for purposes of section
871(m) transactions. Generally, an "ac-
count" for purposes of the QI agreement
means any account for which QI acts as a
qualified intermediary. See section 2.01 of
the proposed QI agreement. QIs and tax-
payers, however, do not always hold sec-
tion 871(m) transactions in an account
relationship. Section 2.01 of the proposed
QI agreement therefore defines "account,"
when applied to a QI acting as a QDD, as
any potential section 871(m) transaction
or underlying security where the QI re-
ceives payments as a principal and any
potential section 871(m) transaction
where the QI makes payments as a prin-
cipal. However, section 5 of the proposed
QI agreement does not require a QI that is
acting as a QDD to document each ac-
count; rather it limits a QDD's obligation
to document only an account holder of an
account to which the QDD makes a re-
portable payment or qualifying dividend
equivalent offsetting payment (or pay-
ment that otherwise would have been a
qualifying dividend equivalent offsetting
payment but for the QDD's failure to ob-
tain a waiver or collect and maintain in-
formation about a U.S. non-exempt recip-
ient account holder as required by section
8.03(C) of the proposed QI agreement).

(F) Qualified securities lenders. Once
implemented, the QDD regime is intended
to replace the qualified securities lender
(QSL) regime described in Notice 2010-
46, 2010-25 I.R.B. 757. The proposed QI
agreement will require a QI to act as a
QDD for all securities lending and sale-
repurchase transactions the QDD enters
into that are section 871(m) transactions,
in addition to acting as a QDD for pay-
ments with respect to other potential sec-
tion 871(m) transactions and underlying
securities as a principal. All securities
lending and sale-repurchase transactions
the QI enters into that are section 871(m)
transactions will be deemed to be entered
into by the QI as a principal and therefore
within the QDD regime. Until the QDD
regime is implemented, the QSL rules (in-
cluding the credit-forward rules described
in Notice 2010-46) will continue to apply

for substitute dividend payments made
pursuant to a securities lending or a sale-
repurchase transaction. For more informa-
tion about the QSL regime, see Notice
2010-46.

(G) Coordination with 871(m) regula-
tions. The Treasury Department (Trea-
sury) and the IRS intend to modify, to the
extent necessary, the section 871(m) reg-
ulations to coordinate with provisions of
the QI agreement relevant to the require-
ments of QDDs and withholding agents
making payments to QDDs (as those pro-
visions are finalized).

### .02 Periodic Review and Certifications of Compliance.

(A) In general. The 2014 QI agreement
replaced the previous external audit re-
quirement with an internal compliance
and review program. As part of this com-
pliance program, the responsible officer is
required to make periodic compliance cer-
tifications and provide certain factual in-
formation to the IRS. After the 2014 QI
agreement was issued, commentators
raised concerns about the administrability
of the compliance review procedures, in-
cluding potential costs of implementing
and conducting a compliance program,
difficulties in allocating resources to con-
duct the periodic review in the last year of
the certification period, and the lack of
detailed standards for performance of the
QI's periodic review similar to those pro-
vided in Rev. Proc. 2002-55, 2002-2 C.B.
435.

Under the proposed QI agreement, a
QI's responsible officer will still be re-
quired to make a periodic certification of
internal controls as described in section
10.03 and Appendix I of the proposed QI
agreement. In making this certification,
the responsible officer may rely on, in
addition to the results of the periodic re-
view, any other processes or reviews that
the responsible officer has determined are
necessary in order to make the certifica-
tion. This allows the responsible officer to
decide, for example, whether to hire an
external reviewer (for example, a law firm
or accounting firm) and what the scope of
the engagement should be (for example,
whether the external reviewer will con-
duct a review of the sufficiency of the
QI's internal controls or whether the re-

view will be limited to the periodic review
discussed below). The responsible officer
must, however, document what he or she
has relied upon in making the certification
and retain such documentation for the
same period of time for which the com-
pliance review report and certifications
are required to be retained pursuant to
section 10.06(D) of the proposed QI
agreement. For example, if the responsi-
ble officer relies on an internal or external
reviewer to conduct a review of the inter-
nal controls and systems, the responsible
officer must retain any report delivered by
the reviewer.

In addition to making the certification
of internal controls, the QI is required to
report certain factual information (de-
scribed in Appendix I) regarding its doc-
umentation, withholding, reporting, and
other obligations under the QI agreement,
and, in the case of a QI that is acting as a
QDD, certain information related to the
determination of its QDD tax liability (as
described in section 3.09 of the proposed
QI agreement). This factual information
will be gathered, in part, through the test-
ing of accounts and transactions required
as part of the periodic review, as described
in sections 10.04 and 10.05 of the pro-
posed QI agreement. This review will be
focused on the testing of accounts and
transactions rather than a substantive eval-
uation of the sufficiency of a QI's policies
and procedures. Section 10.05(A) through
(E) of the proposed QI agreement pro-
vides the objectives for performing the
review, and Appendix I to the proposed
QI agreement describes the factual infor-
mation that will be required to be reported
to the IRS upon completion of the review.
In order to allow QIs to have some flexi-
bility in determining how to satisfy the
objectives for the review, the IRS does not
intend to publish a step-by-step audit plan
as was previously provided in Rev. Proc.
2002-55, but the QI is expected to create
a step-by-step plan to satisfy the objec-
tives for the review contained in section
10.05(A) through (E) of the proposed QI
agreement and to provide the required fac-
tual information. In response to comments
requesting a safe harbor method for deter-
mining a sample of accounts for the peri-
odic review, this Notice provides a strati-
fied statistical sampling methodology in
Appendix II to the proposed QI agree-

ment. In addition, the proposed QI agree-
ment requires that a QI that has 50 ac-
counts or more review at least 50 accounts
as part of the periodic review. If a QI has
fewer than 50 accounts, it must review all
of its accounts and is not allowed to use
the sampling procedures in Appendix II to
the proposed QI agreement.

In addition, section 10 of the proposed
QI agreement has been clarified to prevent
unintended inferences that the periodic re-
view must satisfy the standards of a finan-
cial audit or other attestation engagement
of a certified public accountant. Refer-
ences to an "auditor" (in all contexts,
whether internal or external) have been
replaced with "reviewer." The description
of the standard of independence required
of a reviewer has also been clarified. The
responsible officer can arrange for the re-
view to be conducted by either an external
or an internal reviewer to the extent pro-
vided in the proposed QI agreement. In
either case, the reviewer must have suffi-
cient independence to objectively conduct
the review. For example, a reviewer,
whether internal or external, cannot be
reviewing his or her own work (for exam-
ple, systems he or she designed or docu-
mentation he or she validated).

(B) Waiver. Under certain circum-
stances, section 10.07 of the proposed QI
agreement allows a QI that is a foreign
financial institution (FFI) that is not acting
as a QDD and that is not part of a consol-
idated compliance group to apply for and
obtain a waiver of the requirement to con-
duct the periodic review and to provide
some of the factual information specified
in Appendix I to the proposed QI agree-
ment. In cases where the QI applies for a
waiver, it is still required to provide cer-
tain factual information along with its pe-
riodic certification. This information is
provided in Appendix I to the proposed QI
agreement.

(C) Periodic review timing. The 2014
QI agreement required that the periodic
review be conducted for the last year of
the certification period. In response to
comments regarding potential difficulties
with this requirement, including resource
constraints with all QIs needing to con-
duct periodic reviews at the same time, the
proposed QI agreement allows a QI to
choose which year in the certification pe-
riod to select for its periodic review. How-

ever, if a QI is also acting as a QDD, it
must use 2017 for its periodic review for
the initial certification period because
QDD status is not applicable for 2015 and
2016.

(D) Compliance obligations and initial
certification date. A QI that had a QI
agreement under Rev. Proc. 2000-12,
2000-1 C.B. 387, (as amended) in effect
prior to June 30, 2014, with an audit cycle
that would have extended past June 30,
2014, is not required to complete an audit
under the previous QI agreement (Rev.
Proc. 2000-12). A QI with a 2014 QI
agreement in effect on or after June 30,
2014, must comply with the compliance
obligations under that agreement as re-
vised in the QI agreement in effect after
December 31, 2016.

For purposes of determining the certi-
fication period, the initial certification pe-
riod is the period ending on the third full
calendar year that the 2014 QI agreement
and any superseding revenue procedure is
in effect. Therefore, a QI with a QI agree-
ment with an effective date of June 30,
2014, must treat the initial certification
period as ending on December 31, 2017,
and will be required to make the required
certification on or before July 1, 2018,
pursuant to the requirements of the QI
agreement in effect after December 31,
2016.

(E) FATCA requirements. As part of
the QI agreement, a QI that is an FFI is
required to comply with the FATCA re-
quirements applicable to its chapter 4 sta-
tus as a participating FFI, registered
deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI, and
a QI that is a non-financial foreign entity
(NFFE) acting on behalf of its sharehold-
ers is required to comply with the require-
ments of a direct reporting NFFE. In ad-
dition the proposed QI agreement clarifies
that the QI's responsible officer can rely
on other personnel with oversight or re-
sponsibility for the QI's FATCA require-
ments as a participating FFI, registered
deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI (as
defined in section 2.28 of the proposed QI
agreement) or its requirements as a direct
reporting NFFE or sponsoring entity, as
applicable, in making its certifications re-
lating to its FATCA obligations. In con-
ducting the periodic review, a QI's re-

quirements relating to its FATCA
compliance are limited to those accounts
for which it is acting as a QI.

(F) Consolidated compliance program.
The compliance procedure described in
the 2014 QI agreement included an allow-
ance for a QI to be a member of a con-
solidated compliance program under the
supervision of a "compliance QI," subject
to the approval of the IRS. In order to
establish a consolidated compliance pro-
gram, the responsible officer of the com-
pliance QI should consult the Financial
Intermediaries Team at the address in sec-
tion 12.06 of the proposed QI agreement
to determine if the proposed consolidated
compliance program is acceptable. If sta-
tistical sampling is to be utilized for the
periodic review and testing of accounts
and transactions, a sample plan should
also be proposed. In evaluating the con-
solidated compliance program request, the
goal of the Financial Intermediaries Team
is to have an open dialogue concerning
any issues that may materially affect a
QI's ability to fulfill its responsibilities
under the QI agreement. If a QI is part of
a consolidated compliance program under
section 10.02(B) of the proposed QI
agreement that is approved by the IRS, the
compliance QI will be required to provide
factual information for each QI member
of the group separately but can make the
certification of internal controls for the
entire consolidated compliance group.

.03 Limited FFIs and Limited Branches.
Pursuant to the regulations under chapter 4,
as modified by Notice 2015-66, 2015-41
I.R.B. 541, limited FFI (and limited branch)
status will no longer be available as of Jan-
uary 1, 2017. Accordingly, to conform with
the regulations and Notice 2015-66, the
proposed QI agreement removes limited FFI
as a category of entity eligible to enter into
the QI agreement.

.04 Substitute Interest. Comments re-
quested that, as the QSL regime is incor-
porated into the QDD regime, consider-
ation be given to covering payments of
substitute interest on debt securities under
the QI agreement in addition to substitute
dividend payments. In response, the pro-
posed QI agreement allows a QI to as-
sume primary chapters 3 and 4 withhold-
ing responsibility and primary Form 1099
reporting and backup withholding respon-
sibility for payments of interest and sub-

stitute interest it receives in connection
with a sale-repurchase or similar agree-
ment, a securities lending transaction, or
collateral that it holds in connection with
its activities as a securities dealer. This
will allow a QI to provide a Form
W-8IMY, Certificate of Foreign Interme-
diary, Foreign Flow-Through Entity, or
Certain U.S. Branches for United States
Tax Withholding and Reporting, to a with-
holding agent certifying that the QI is a QI
assuming primary withholding responsi-
bility without requiring the QI to distin-
guish between these payments of interest
and substitute interest the QI receives as a
principal and those that it receives as an
intermediary. QIs that assume primary
withholding responsibility for payments
of interest and substitute interest as de-
scribed in this paragraph will be required
to assume primary withholding responsi-
bility for all such payments.

.05 Partnerships or Trusts Applying
the Joint Account or Agency Options. In
response to comments received on the
2014 QI agreement, sections 4.05(A)(1)
and 4.06(A)(2) of the proposed QI agree-
ment have been modified to allow a QI to
apply the joint account or agency option
to partnerships or trusts that are covered
as accounts that are excluded from the
definition of financial accounts under An-
nex II of an applicable IGA or under
§ 1.1471-5(a). In addition, consistent with
the WP and WT agreements, a QI can
apply the joint account or agency option
to partnerships or trusts that are owner-
documented FFIs with respect to the QI.

.06 Limitation on Benefits for Treaty
Claims. In order to enhance and make
more robust claims for a reduced rate of
chapter 3 withholding under an income
tax treaty, Treasury and the IRS intend to
modify the chapter 3 regulations to re-
quire withholding agents to collect certain
information and certifications regarding a
beneficial owner's claim for treaty bene-
fits. Form W-8BEN-E, Certificate of Sta-
tus of Beneficial Owner for United States
Tax Withholding and Reporting (Entities),
was revised in April 2016 to include
checkboxes for a beneficial owner to pro-
vide information regarding the limitation
on benefits provision of an applicable
treaty that it satisfies, and Form 1042-S
was revised in 2016 to include a line for a
withholding agent to report the corre-

sponding limitation on benefits provision
code. The proposed QI agreement modi-
fies the requirements for a QI using doc-
umentary evidence to document an entity
account holder claiming a reduced rate of
withholding under an income tax treaty to
require the collection of information re-
garding limitation on benefits on the treaty
statement provided by the account holder.
A QI opening an account or obtaining
documentation for an entity account
holder on or after January 1, 2017, will be
required to collect this limitation on ben-
efits information. For QIs with pre-
existing entity accounts (as described in
section 5.10(A) of the proposed QI agree-
ment) that were documented with docu-
mentary evidence, there will be a two-year
transition period provided for the collec-
tion of the appropriate limitation on ben-
efits information (unless there is a change
in circumstances that requires the QI to
obtain corrected information). For QIs
that documented entity accounts with
Forms W-8, those forms may be relied up
on until their normal expiration period
(unless there is a change in circumstances
that requires QI to obtain corrected infor-
mation). Under the proposed QI agree-
ment, a withholding agent will be subject
to an actual knowledge standard with re-
spect to the limitation on benefits claims.
The chapter 3 regulations also will be
similarly amended to apply an actual
knowledge standard for limitation on ben-
efits claims.

.07 Validation of Treaty Claims. In ad-
dition to the standard of knowledge for
limitation on benefits claims discussed in
section 2.06 of this Notice, the proposed
QI agreement provides that a QI will be
considered to have reason to know that a
claim for treaty benefits is unreliable or
incorrect if the account holder claims ben-
efits under a treaty that does not exist or is
not in force and thus is not included on
the list maintained at https://www.irs.
gov/businesses/international-businesses/
united-states-income-tax-treaties-a-to-z.
This reason to know rule will generally
apply to pre-existing accounts for which
the QI already holds valid documentation
only upon a change in circumstances. For
a pre-existing entity account, this reason
to know rule will also apply when the QI
obtains a written limitation on benefits
statement. For purposes of applying this

rule, a "pre-existing account" or "pre-
existing entity account" is an account for
which QI holds valid documentation prior
to January 1, 2017, for a QI with a QI
agreement in effect prior to that date. For
a QI that did not have a QI agreement in
effect prior to January 1, 2017, it means
an account maintained (and for which QI
has valid documentation) prior to the ef-
fective date of its QI agreement. For all
new accounts, the reason-to-know rule
will apply upon account opening. The
chapter 3 regulations will be amended to
include this reason to know rule for all
withholding agents.

.08 Conforming Changes and Correc-
tion of Errors. In addition to the changes
described in this Notice, additional
changes have been made in the proposed
QI agreement that either correct minor
errors, further clarify the current rule, con-
form to changes made in the WP and WT
agreements, or make conforming changes
consistent with changes addressed in other
guidance or other IRS correspondence
(for example, e-mails from the IRS to
subscribing QIs). An example of a correc-
tion is the presumption rules described in
section 5.13(C)(3) of the proposed QI
agreement which have been modified to
include U.S. source bank deposit interest
not subject to chapter 4 withholding (as
well as payments on certain short-term
obligations) among those payments that a
QI is required to treat as made to a U.S.
non-exempt recipient account holder un-
der the presumption rules. The application
of this presumption rule to such bank de-
posit interest was inadvertently omitted in
the 2014 QI agreement and is expected to
apply only in limited cases. For the por-
tion of calendar years 2014-2016 that a
QI had in effect a 2014 QI agreement, the
QI will not be treated as non-compliant if
it does not apply the corrected presump-
tion rule from the proposed QI agreement.

In addition, consistent with the defini-
tions provided in the chapter 3 regula-
tions, the definition of U.S. person in sec-
tion 2.91 of the proposed QI agreement
has been clarified for certain individuals
who are dual-resident taxpayers.

.09 Effective Date. When the proposed
QI agreement provided in section 4 of this
Notice is finalized, it will be effective on
or after January 1, 2017. The effective
date of the proposed QI agreement for an

applicant will depend on when the QI
submits its application and whether the QI
has received any reportable payments
prior to when it submits its application.
Beginning on January 1, 2017, a prospec-
tive QI that applies for QI status prior to
March 31 of a calendar year, if approved,
will have a QI agreement with an effective
date of January 1 of that year. If a pro-
spective QI applies for QI status after
March 31 of a calendar year and has not
received a reportable payment prior to the
date it applies for QI status, if approved, it
will have a QI agreement with an effective
date of January 1 of that year. If a pro-
spective QI applies for QI status after
March 31 and has received a reportable
payment prior to the date it applies, if
approved, its QI agreement will have an
effective date of the first of the month in
which its QI application is approved and
the prospective QI is issued a QI-EIN. A
QI that seeks to renew its QI agreement
must renew prior to March 31, 2017, and
the renewed QI agreement shall have an
effective date of January 1, 2017.

.10 Term of the QI Agreement. The
proposed QI agreement would expire, un-
less otherwise terminated, at the end of the
third full calendar year the agreement is in
effect.

.11 Changes to the WP and WT Agree-
ments. The proposed changes to require-
ments for the QI compliance review pre-
viewed in this Notice are also intended,
with appropriate modifications, to be in-
corporated in a revised withholding for-
eign partnership agreement (WP agree-
ment) and withholding foreign trust
agreement (WT agreement), revising the
WP agreement and WT agreement pub-
lished in Rev. Proc. 2014-47. Treasury
and the IRS will publish the revised WP
agreement and WT agreement with these
revisions and a limited number of correc-
tions to the WP agreement and WT agree-
ment (as published in Rev. Proc. 2014-
47), to be effective on or after January 1,
2017. Beginning January 1, 2017, the WP
agreement will also provide the require-
ments for a reverse hybrid entity that de-
sires to enter into a WP agreement with
respect to the requirements for document-
ing and withholding on owners claiming
treaty benefits. These requirements in-
clude that such entity meet all of its filing
requirements as a corporation for U.S. tax

purposes; prepare and provide for certain
interest holders that are U.S. persons a
Passive Foreign Investment Company
(PFIC) Annual Information Statement
(described in § 1.1295-1(g)(1)) (if the WP
is a PFIC for the year); and prepare and
retain for IRS review a reconciliation
statement showing the amount of U.S.
source FDAP income allocated to each
direct or indirect owner of the WP that
claims treaty benefits during the calendar
year. This is to eliminate the need for the
riders that have been used previously for
such entities to enter into WP agreements.

Treasury and the IRS request com-
ments on an allowance for consolidated
periodic reviews and certifications for
WPs that are FFIs, similar to what is per-
mitted for QIs. Treasury and the IRS will
consider, if adopted, whether this option
would only be available to WPs that, for
chapter 4 purposes, should be considered

sponsored FFIs under a sponsoring entity
that implements a compliance program
that includes uniform practices, proce-
dures, and systems, subject to uniform
monitoring and control, with respect to all
WPs for which it acts. If this consolidated
review approach is adopted, it is antici-
pated that the sponsoring entity for pur-
poses of the WP agreement would be
jointly liable (with the WP) for any liabil-
ity of the WP for failing to withhold and
report as required under the WP agree-
ment. In addition, if this approach is ad-
opted, the chapter 4 regulations will be
amended to allow a WP to be a sponsored
FFI to the extent provided in the revised
WP agreement and to register under the
sponsoring entity.

## SECTION 3. APPLICATION FOR QI STATUS

.01 Entities Eligible to Execute a QI
Agreement. A QI agreement may be en-
tered into by persons described in
§ 1.1441-1(e)(5)(ii) (for example, FFIs,
foreign clearing organizations, and for-
eign branches of U.S. financial institutions
or U.S. clearing organizations). With re-
spect to an FFI, as defined in § 1.1471-
5(d), the FFI may apply to enter into a QI
agreement if the FFI is able to and agrees
to satisfy the requirements and obligations
of (1) a participating FFI (including a re-
porting Model 2 FFI), (2) a registered
deemed-compliant FFI (including a re-

porting Model 1 FFI and a nonreporting
Model 2 FFI treated as registered deemed-
compliant), or (3) a registered deemed-
compliant Model 1 IGA FFI (as defined in
section 2.17(C) of the proposed QI agree-
ment). See § 1.1471-1(b)(91) and (111).
An FFI that is a certified deemed-
compliant FFI (including a nonreporting
IGA FFI (as defined in § 1.1471-1(b)(83))
may enter into a QI agreement if the FFI
meets and agrees to assume the obliga-
tions of, and to be treated as, a participat-
ing FFI (including a reporting Model 2
FFI), a registered deemed-compliant FFI
(including a reporting Model 1 FFI or a
nonreporting Model 2 FFI treated as reg-
istered deemed-compliant), or a registered
deemed-compliant Model 1 IGA FFI with
respect to all accounts that it maintains
(even if the FFI does not intend to desig-
nate an account as one for which it will act
as a QI). A central bank of issue may enter
into a QI agreement provided that it meets
and agrees to assume the obligations of,
and to be treated as, a participating FFI
(including a reporting Model 2 FFI) or a
registered deemed-compliant FFI (includ-
ing a reporting Model 1 FFI) with respect
to any account that it maintains and that is
held in connection with a commercial fi-
nancial activity described in § 1.1471-
6(h) and for which it receives a withhold-
able payment (as defined in § 1.1471-
1(b)(145)). A foreign branch of a U.S.
financial institution may also apply to en-
ter into a QI agreement provided that ei-
ther it is a reporting Model 1 FFI or it
agrees to assume the requirements and
obligations of a participating FFI (includ-
ing a reporting Model 2 FFI). See
§ 1.1441-1(e)(5)(ii).

An entity that is a territory financial
institution (territory FI) (as defined in
§ 1.1471-1(b)(130)) or a nonparticipating
FFI (as defined in § 1.1471-1(b)(82)) may
not apply for a QI agreement.

The QI agreement may be entered into
by a foreign corporation that is an NFFE
(as defined in § 1.1471-1(b)(80)) de-
scribed in § 1.1441-1(e)(5)(ii)(C) or that
is an eligible entity seeking to become a
QDD. For example, an entity may seek to
obtain QI status to present claims of ben-
efits under an income tax treaty on behalf
of its shareholders or other persons (other
than FFIs) for which the foreign corpora-
tion acts as an intermediary. An NFFE

that enters into a QI agreement to act on
behalf of its shareholders must meet and
agree to assume the obligations of, and to
be treated as, a direct reporting NFFE
under § 1.1472-1(c)(3). An NFFE that
enters into a QI agreement to act on behalf
of persons other than its shareholders will
be required to satisfy the withholding and
reporting requirements of §§ 1.1472-1(a)
and 1.1474-1(i) with respect to any NFFE
that is a beneficial owner for whom the QI
is acting with respect to a withholdable
payment. The QI agreement does not ap-
ply to a foreign partnership or foreign
trust. A foreign partnership or foreign
trust may seek to qualify as a withholding
foreign partnership or withholding foreign
trust. See § § 1.1441-5(c)(2)(ii) and
1.1441-5(e)(5)(v). In light of the changes
that will be made to the WP agreement
discussed in section 2.11 of this Notice,
Treasury and the IRS expect to eliminate
the allowance for NFFEs acting on behalf
of their shareholders to be QIs. Comments
are requested regarding the types of enti-
ties and situations where an NFFE would
be seeking to act as a QI on behalf of its
shareholders (other than a reverse hybrid
entity described in section 2.11 of this
Notice) and why the WP agreement does
not provide a solution for those entities.

.02 Prospective QI (Including QI Act-
ing as a QDD). Prior to submitting Form
14345, Qualified Intermediary Applica-
tion, a prospective QI (other than an
NFFE that is not acting as an intermediary
on behalf of its shareholders and certain
foreign central banks of issue) must have
submitted the information specified in
Form 8957, Foreign Account Tax Compli-
ance Act (FATCA) Registration, through
the FATCA registration website available
at www.irs.gov/FATCA, and obtained its
chapter 4 status as a participating FFI (in-
cluding a reporting Model 2 FFI), regis-
tered deemed-compliant FFI (including a
reporting Model 1 FFI and a nonreporting
Model 2 FFI treated as registered deemed-
compliant), registered deemed-compliant
Model 1 IGA FFI (as defined in section
2.17(C) of the proposed QI agreement),
direct reporting NFFE, or sponsoring en-
tity of a direct reporting NFFE, as appli-
cable, along with a global intermediary
identification number (GIIN) to be used to
identify itself to withholding agents and to

tax administrators for FATCA reporting
(the GIIN is separate from the QI-EIN).

To become a QI, a prospective QI must
submit Form 14345, Application for
Qualified Intermediary, Withholding For-
eign Partnership, or Withholding Foreign
Trust Status, in the manner provided by
the form or accompanying instructions.
An application must also include any ad-
ditional information and documentation
requested by the IRS. The Form 14345
must establish, to the satisfaction of the
IRS, that the applicant has adequate re-
sources and procedures to comply with
the terms of the QI agreement. An entity
that would like to become a QI to act as a
QDD must apply to enter into a QI agree-
ment and include the information relating
to QDDs.

If the IRS approves the QI application,
it will notify the QI of its approval. The
approval notice will include a QI-EIN for
fulfilling the requirements of a QI (includ-
ing a QI acting as a QDD if approved for
such purpose) under chapters 3, 4, and 61
and sections 871, 881, and 3406, includ-
ing making tax deposits and filing Forms
945, 1042, 1042-S, 1099, and 8966.

The IRS will not enter into a QI agree-
ment with an FFI if the IRS has not ap-
proved the "know-your-customer" prac-
tices and procedures for opening accounts
of the jurisdiction where the FFI is located
because the QI agreement as applicable to
an FFI allows for the use of documentary
evidence obtained under a jurisdiction's
"know-your-customer" practices. A list of
jurisdictions for which the IRS has re-
ceived know-your-customer information
and for which the know-your-customer
rules are acceptable (approved KYC juris-
diction) is available at: http://www.irs.gov/
Businesses/International-Businesses/List-
of-Approved-KYC-Rules. To request ap-
proval of a jurisdiction's know-your-
customer rules, contact the KYC
coordinator in the Foreign Intermediar-
ies Program at the address provided in
section 3.03 of this Notice.

A QI that is an NFFE generally is not
required to be located in an approved
KYC jurisdiction because an NFFE is re-
quired to collect Forms W-8 and W-9
and may not apply the KYC documenta-
tion practices and procedures. See section
5.01(A)(2) of the proposed QI agreement

for the documentation requirements appli-
cable to a QI that is an NFFE.

.03 Existing QI. An FFI that seeks to
renew its QI agreement must do so
through the FATCA registration website
available at www.irs.gov/FATCA. An
NFFE that is a direct reporting NFFE or a
sponsoring entity of a direct reporting
NFFE must also renew its QI agreement
through the FATCA registration website.
The QI will retain its QI-EIN to fulfill the
requirements of a QI under chapters 3, 4,
and 61 and sections 871, 881, and 3406,
including making tax deposits and filing
Forms 945, 1042, 1042-S, 1099, and
8966.

A QI that seeks to renew its QI agree-
ment and also seeks to act as a QDD must
supplement the renewal request by pro-
viding a statement containing all informa-
tion required by Form 14345 relating to a
QDD (but does not have to provide a new
Form 14345).

A QI that is an NFFE and that is not
acting as a QI on behalf of its sharehold-
ers, and is not a sponsoring entity, must
renew its QI agreement by submitting a
request for renewal to the Foreign Inter-
mediaries Program at the following ad-
dress:

Internal Revenue Service
Foreign Payments Practice
Foreign Intermediaries Program
290 Broadway, 12th Floor NW
New York, New York 10007-1867
Attention: QI Applications

## SECTION 4. PROPOSED QUALIFIED INTERMEDIARY AGREEMENT

The text of the proposed QI agreement
is set forth below. The IRS will no longer
provide signed copies of the QI agree-
ment. A reporting Model 2 FFI should
apply this Agreement by substituting the
term "reporting Model 2 FFI" for "partic-
ipating FFI" throughout this Agreement,
except in cases where this Agreement ex-
plicitly refers to a reporting Model 2 FFI.
A reporting Model 1 FFI and nonreporting
Model 2 FFI treated as a registered
deemed-compliant FFI should apply this
Agreement by substituting the term "re-
porting Model 1 FFI" or "nonreporting
Model 2 FFI" (as applicable) for "registered
deemed-compliant FFI" throughout this
Agreement, except in cases where this

Agreement explicitly refers to a reporting
Model 1 FFI or nonreporting Model 2 FFI
treated as a registered deemed-compliant FFI.

THIS AGREEMENT is made under
and in pursuance of sections 1441, 1442,
1471, and 1472 and §§ 1.1441-1(e)(5)
and 1.1441-1(e)(6):

WHEREAS, QI has submitted an ap-
plication in accordance with this revenue
procedure to be a qualified intermediary;

WHEREAS, QI and the IRS desire to
enter into an agreement to establish QI's
rights and obligations regarding documen-
tation, withholding, information report-
ing, tax return filing, deposit, and refund
procedures under sections 1441, 1442,
1443, 1461, 1471, 1472, 1474, 3406, 6041,
6042, 6045, 6049, 6050N, 6302, 6402, and
6414, and tax liability under sections 871(a)
and 881 for a QI that is acting as a qualified
derivatives dealer (QDD), with respect to
certain types of payments;

WHEREAS, QI represents that there
are no legal restrictions that prohibit it
from complying with the requirements of
this Agreement;

WHEREAS, if QI is a foreign finan-
cial institution (FFI), QI represents that, as
of the effective date of this Agreement, it
has agreed to comply with the require-
ments of the FFI agreement, in the case of
a participating FFI (including a reporting
Model 2 FFI); § 1.1471-5(f)(1) or the
applicable Model 2 IGA, in the case of a
registered deemed-compliant FFI (other
than a reporting Model 1 FFI); or the
applicable Model 1 IGA, in the case of a
reporting Model 1 FFI or a registered
deemed-compliant Model 1 IGA FFI; and

WHEREAS, if QI is an NFFE that
desires to enter into this Agreement for
purposes of presenting claims of benefits
under an income tax treaty on behalf of its
shareholders, QI represents that it will
comply with the requirements of a direct
reporting NFFE under § 1.1472-1(c)(3);

NOW, THEREFORE, in consider-
ation of the following terms, representa-
tions, and conditions, the parties agree as
follows:

## SECTION 1. PURPOSE AND SCOPE

Sec. 1.01. General Obligations. When
the IRS enters into a QI Agreement with a
foreign person or a U.S. person to cover a
foreign branch, that foreign person (or
foreign branch) becomes a QI. QI is a

withholding agent under chapters 3 and 4,
and a payor under chapter 61 and section
3406, for amounts that it pays to its ac-
count holders.

If QI is an FFI, the requirements QI has
agreed to as a participating FFI, registered
deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI con-
tinue to apply in addition to the require-
ments under this Agreement. If QI acts as
a QI with respect to an account, this
Agreement will reference QI's chapter 4
obligations when necessary to facilitate
coordination with a QI's obligations under
chapters 3, 4, and 61, and section 3406,
with respect to such account holders. A
participating FFI's (including a reporting
Model 2 FFI's) obligations are provided
in the FFI agreement, a registered
deemed-compliant FFI's (other than a re-
porting Model 1 FFI) obligations are pro-
vided in § 1.1471-5(f)(1) or the applicable
Model 2 IGA, and the obligations of a
reporting Model 1 FFI or a registered
deemed-compliant Model 1 IGA FFI are
provided in the applicable Model 1 IGA.
For purposes of chapter 4, QI must com-
ply with its FATCA requirements as a
participating FFI, registered deemed-
compliant FFI, or registered deemed-
compliant Model 1 IGA FFI (as applica-
ble) with respect to all financial accounts
that it maintains, irrespective of whether
QI acts as a QI with respect to an account
holder, as well as the requirements of a
withholding agent for any payee that is a
nonparticipating FFI or NFFE that is not
an account holder. If QI is an FFI, QI must
also, pursuant to this Agreement, assume
primary reporting responsibility for pur-
poses of section 1472, for certain indirect
account holders for which it acts as a QI.

If QI is an NFFE acting as a QI on
behalf of its shareholders, the require-
ments QI has agreed to as a direct report-
ing NFFE apply in addition to the require-
ments under this Agreement, and, to the
extent necessary to facilitate coordination
of its direct reporting NFFE obligations
with its obligations as a QI, the direct
reporting NFFE obligations are incorpo-
rated into this Agreement. A direct report-
ing NFFE's obligations are provided in
§ 1.1472-1(c)(3). For purposes of chapter
4, if QI is an NFFE acting as a QI on
behalf of its shareholders, QI must comply
with the requirements of a direct reporting

NFFE with respect to any shareholder that
is a substantial U.S. owner as defined in
§ 1.1473-1(b). If QI is an NFFE acting on
behalf of persons other than its sharehold-
ers, QI must assume primary reporting
responsibility for purposes of section 1472
for any person for which it acts as a QI.

For purposes of chapters 3 and 61 and
section 3406, QI must act in its capacity as
a QI pursuant to this Agreement for those
accounts that QI holds with a withholding
agent and that QI has designated as ac-
counts for which it acts as a QI. QI is not
required to act as a QI for all accounts that
it holds with a withholding agent. How-
ever, QI must, as part of its QI Agreement,
materially comply with the requirements
of a withholding agent or payor, as appli-
cable to a nonqualified intermediary
(NQI) under chapters 3 and 61 and section
3406, for any account for which it does
not (or cannot) act as a QI and for any
payee that is not an account holder. If QI
designates an account as one for which it
will act as a QI, it must act as a QI for all
payments made to that account and obtain
the documentation required under section
5 of this Agreement for such account.

When QI acts as a QI for an account
and assumes primary chapter 3 withhold-
ing responsibility for payments to the ac-
count, QI must also assume primary with-
holding responsibility for withholdable
payments made to such account for chap-
ter 4 purposes. If QI acts as a QI with
respect to payments of substitute interest,
as described in section 3.03(A) of this
Agreement, it must act as a QI and assume
primary withholding responsibility for all
such payments of substitute interest.

If QI acts as a sponsoring entity on
behalf of a sponsored FFI (as defined in
§ 1.1471-1(b)(121)) or sponsored direct
reporting NFFE (as defined in § 1.1471-
1(b)(123)), it must comply with the due
diligence, withholding, reporting, and
compliance requirements of a sponsoring
entity in addition to its requirements under
this Agreement.

If QI acts as a QDD, it must act as a
QDD for all payments made as a principal
with respect to potential section 871(m)
transactions and all payments received as
a principal with respect to potential sec-
tion 871(m) transactions and underlying
securities, excluding any payments re-
ceived by the QDD to the extent the pay-

ment is treated as income effectively con-
nected with the conduct of a trade or
business within the United States within
the meaning of section 864. In addition, a
QI must act as a QDD for any securities
lending or sale-repurchase transactions (as
defined in § 1.871-15(a)(13)) QI enters
into that are section 871(m) transactions.
For purposes of this Agreement, a QDD is
deemed to make and receive payments
pursuant to those securities lending and
sale-repurchase transactions as a princi-
pal. A QI may not act as a QDD when it
receives or makes payments as an inter-
mediary. A QI acting as a QDD must
assume primary chapter 3 and chapter 4
withholding responsibility and primary
Form 1099 reporting and backup with-
holding responsibility under section 3406
for payments made as a QDD with respect
to any potential section 871(m) transac-
tion provided the amount paid is an
amount subject to chapter 3 or 4 withhold-
ing or a reportable payment under chapter
61. A QI acting as a QDD (other than a
QDD that is a foreign branch of a U.S.
financial institution) also must satisfy its
QDD tax liability as determined under
section 3.09 of this Agreement. The QDD
(other than a QDD that is a foreign branch
of a U.S. financial institution) must report
both its withholding tax liability under
chapters 3 and 4 and its QDD tax liability
on Form 1042. A U.S. financial institution
with a foreign branch that acts as a QDD
must file the appropriate U.S. income tax
return (e.g., Form 1120, U.S. Corporation
Income Tax Return) for the tax year cov-
ered by the QI Agreement to report and
pay its tax liability under chapter 1 and
would not have a separate QDD tax lia-
bility.

Sec. 1.02. Parties to the Agreement.
This Agreement applies to:

(A) QI; and

(B) The Internal Revenue Service.

If QI is an FFI, QI can only designate
an account that it holds as a QI designated
account if the branch of QI that holds the
account operates in a KYC jurisdiction
identified under the QI Agreement. QI
may add any jurisdiction in which it op-
erates a branch that is not initially in-
cluded in its QI application without prior
IRS approval if the jurisdiction is one for
which the IRS will enter into a qualified
intermediary agreement (i.e., the jurisdic-

tion is identified on the IRS's Approved
KYC List) and QI updates its information
on the FATCA registration website with
respect to such branch prior to treating
such branch as a qualified intermediary. A
branch of a QI that is not subject to the
provisions of this Agreement remains sub-
ject to the rules of chapters 3, 4, and 61
and section 3406, as provided in section
1.01 of this Agreement.

## SECTION 2. DEFINITIONS

For purposes of this Agreement, except
as otherwise provided in this Agreement,
the terms listed below are defined as fol-
lows:

Sec. 2.01. Account. "Account" or "Fi-
nancial Account" has the meaning given
to that term in § 1.1471-1(b) with respect
to QI's obligations for chapter 4 purposes.
For other purposes under this Agreement,
"account" or "financial account" means
any account for which QI acts as a qual-
ified intermediary. With respect to a QI
acting as a QDD, "account" means any
potential section 871(m) transaction or
underlying security where QDD receives
payments as a principal and any potential
section 871(m) transaction where QDD
makes payments as a principal.

Sec. 2.02. Account Holder. If QI is an
FFI, an "account holder" means any per-
son that is a direct account holder or an
indirect account holder of an account that
QI has designated to its withholding agent
as an account for which it is acting as a
qualified intermediary. With respect to a
QI that assumes primary withholding re-
sponsibility for a substitute interest pay-
ment as described in section 3.03(A) of
this Agreement, an "account holder" in-
cludes any person that receives such a
payment from the QI. "Account holder"
also means any person that enters into or
holds a potential section 871(m) transac-
tion with a QI acting as a QDD. If QI is an
NFFE acting on behalf of its shareholders,
an "account holder" means each share-
holder for whom QI is acting with respect
to an amount subject to chapter 3 with-
holding or with respect to a withholdable
payment. If QI is an NFFE acting as a
qualified intermediary on behalf of per-
sons other than its shareholders, an "ac-
count holder" means any person for whom
QI is acting with respect to a reportable
payment or withholdable payment.

(A) Direct Account Holder. A direct
account holder is any person who holds an
account directly with QI or holds an own-
ership interest (i.e., a shareholder) directly
in QI if QI is an NFFE. In the case of an
NFFE acting as a qualified intermediary
on behalf of persons other than its share-
holders, a direct account holder is any
person for whom QI is acting with respect
to a reportable payment regardless of
whether such person is the beneficial
owner.

(B) Indirect Account Holder. An in-
direct account holder is any person who
receives amounts from QI but who does
not have a direct relationship with QI. For
example, a person that holds an account
with a foreign intermediary or an interest
in a foreign flow-through entity which, in
turn, has a direct relationship with QI is an
indirect account holder. A person is an
indirect account holder even if there are
multiple tiers of intermediaries or flow-
through entities between the person and QI.

Sec. 2.03. Agreement. "Agreement"
means this Agreement, and the two Ap-
pendices and any Attachments to this
Agreement, and QI's application to be-
come a qualified intermediary. All such
Appendices, Attachments, and QI's appli-
cation are incorporated into this Agree-
ment by reference.

Sec. 2.04. Amount Subject to Chap-
ter 3 Withholding. An "amount subject
to chapter 3 withholding" is an amount
described in § 1.1441-2(a) regardless of
whether such amount is withheld upon.
An amount subject to chapter 3 withhold-
ing shall not include interest paid as part
of the purchase price of an obligation sold
between interest payment dates or original
issue discount paid as part of the purchase
price of an obligation sold in a transaction
other than the redemption of such obliga-
tion, unless the sale is part of a plan the
principal purpose of which is to avoid tax
and QI has actual knowledge or reason to
know of such plan.

Sec. 2.05. Amount Subject to Chap-
ter 4 Withholding. An "amount subject
to chapter 4 withholding" is a withhhold-
able payment (as defined in section 2.98
of this Agreement) for which withholding
is required under chapter 4 or an amount
for which withholding was otherwise ap-
plied under chapter 4.

Sec. 2.06. Assumption of Withhold-
ing Responsibility. An "assumption of
withholding responsibility" refers to a QI
that assumes primary chapters 3 and 4
withholding responsibility with respect to
payments of U.S. source FDAP income,
or assumes primary Form 1099 reporting
and backup withholding responsibility. A
QI that has an assumption of withholding
responsibility assumes the primary re-
sponsibility for deducting, withholding,
and depositing the appropriate amount
from a payment. Generally, QI's assump-
tion of primary chapters 3 and 4 withhold-
ing responsibility or the assumption of
primary backup withholding responsibil-
ity relieves the person who makes a pay-
ment to QI from the responsibility to with-
hold. Under section 3.05 of this
Agreement, QI generally has primary
Form 1099 reporting and backup with-
holding responsibility with respect to cer-
tain payments even though it does not
assume such responsibility for payments
not described in that section.

Sec. 2.07. Backup Withholding.
"Backup withholding" means the with-
holding required under section 3406.

Sec. 2.08. Beneficial Owner. A "ben-
eficial owner" has the meaning given to
that term in § 1.1441-1(c)(6).

Sec. 2.09. Broker Proceeds. "Broker
proceeds" means gross proceeds (as de-
fined in § 1.6045-1(d)(5)) from a sale that
is reportable under § 1.6045-1(c).

Sec. 2.10. Chapter 3. Any reference to
"chapter 3" means sections 1441, 1442,
1443, 1461, 1463, and 1464.

Sec. 2.11. Chapter 3 Reporting Pool.
A "chapter 3 reporting pool" means a re-
porting pool described in section 8.03(B)
of this Agreement.

Sec. 2.12. Chapter 4. Any reference to
"chapter 4" means sections 1471, 1472,
1473, and 1474.

Sec. 2.13. Chapter 4 Reporting Pool.
A "chapter 4 reporting pool" means a re-
porting pool described in section 8.03(A)
of this Agreement.

Sec. 2.14. Chapter 4 Status. "Chapter
4 status" means the status of a person as a
U.S. person, a specified U.S. person, an
individual that is a foreign person, a par-
ticipating FFI, a deemed-compliant FFI, a
restricted distributor, an exempt beneficial
owner, a nonparticipating FFI, a territory

financial institution, an excepted NFFE, or
a passive NFFE.

Sec. 2.15. Chapter 61. Any reference
to "chapter 61" means sections 6041,
6042, 6045, 6049, and 6050N.

Sec. 2.16. Dealer. A "dealer" has the
meaning given to the term dealer in
§ 1.871-15(a)(2) (i.e., a dealer in securi-
ties within the meaning of section
475(c)(1)).

Sec. 2.17. Deemed-Compliant FFI.
"Deemed-compliant FFI" means an FFI
that is treated, pursuant to section
1471(b)(2) and § 1.1471-5(f), as meeting
the requirements of section 1471(b).

(A) Certified Deemed-Compliant
FFI. "Certified deemed-compliant FFI"
means an FFI described in § 1.1471-
5(f)(2) and includes a nonreporting IGA
FFI, but excludes a nonreporting Model 2
FFI that is treated as a registered deemed-
compliant FFI.

(B) Registered Deemed-Compliant
FFI. "Registered deemed-compliant FFI"
means an FFI described in § 1.1471-
5(f)(1) and includes a reporting Model 1
FFI and a nonreporting Model 2 FFI that
is treated as registered deemed-compliant
FFI. For purposes of this Agreement, a
reference to a registered deemed-
compliant FFI that is providing a chapter
4 withholding rate pool of U.S. payees
includes a registered deemed-compliant
Model 1 IGA FFI.

(C) Registered Deemed-Compliant
Model 1 IGA FFI. "Registered deemed-
compliant Model 1 IGA FFI" means an
FFI treated as a deemed-compliant FFI
under an applicable Model 1 IGA that is
subject to similar due diligence and re-
porting requirements with respect to U.S.
accounts as those applicable to a regis-
tered deemed-compliant FFI under
§ 1.1471-5(f)(1), including the require-
ment to register with the IRS.

Sec. 2.18. Deposit Interest. "Deposit
interest" means interest described in sec-
tion 871(i)(2)(A).

Sec. 2.19. Dividend Equivalent. A
"dividend equivalent" has the meaning
given to that term in § 1.871-15(c).

Sec. 2.20. Documentary Evidence.
"Documentary evidence" means any doc-
umentation obtained under the appropriate
know-your-customer rules (as described
in the Attachments to this Agreement),
any documentary evidence described in

§ 1.1441-6 sufficient to establish entitle-
ment to a reduced rate of withholding
under an income tax treaty, or any docu-
mentary evidence described in § 1.6049-
5(c) sufficient to establish an account
holder's status as a foreign person for
purposes of chapter 61. Documentary ev-
idence does not include a Form W-8 or
Form W-9 (or an acceptable substitute
Form W-8 or Form W-9).

Sec. 2.21. Documentation. "Docu-
mentation" means any valid Form W-8,
Form W-9 (or an acceptable substitute
Form W-8 or Form W-9), or documen-
tary evidence as defined in section 2.20 of
this Agreement, including all statements
or other information required to be asso-
ciated with the form or documentary evi-
dence.

Sec. 2.22. Documented Account
Holder. A "documented account holder"
is an account holder for whom QI holds
valid documentation.

Sec. 2.23. Effective Date of the QI
Agreement. For a prospective QI that ap-
plies to be a QI prior to March 31 of a
given calendar year, the effective date of
the QI Agreement will be January 1 of
that year. For a prospective QI that applies
after March 31 of a given calendar year
and that has not received any reportable
payments prior to the date the application
is submitted, the effective date of the QI
Agreement will be January 1 of that year.
For a prospective QI that applies after
March 31 of a given calendar year and
that has received a reportable payment in
the calendar year prior to the date the
application is submitted, the effective date
of the QI Agreement will be the first of the
month in which the QI application is com-
plete and the QI has received its QI-EIN.
For a QI that is renewing its QI Agree-
ment provided in Rev. Proc. 2014-39,
2014-29 I.R.B. 150, the effective date of
the QI Agreement when renewed by
March 31, 2017, will be January 1, 2017.

Sec. 2.24. Eligible Entity. "Eligible
entity" for QDD status means a qualified
intermediary that is-

(A) A dealer in securities subject to reg-
ulatory supervision as a dealer by a gov-
ernmental authority in the jurisdiction in
which it was organized or operates;

(B) A bank subject to regulatory supervi-
sion as a bank by a governmental author-
ity in the jurisdiction in which it was

organized or operates and that (1) issues
potential section 871(m) transactions to
customers, and (2) receives dividends
with respect to stock or dividend equiva-
lent payments pursuant to potential sec-
tion 871(m) transactions that hedge poten-
tial section 871(m) transactions that it
issued;

(C) An entity that is wholly-owned (di-
rectly or indirectly) by a bank subject to
regulatory supervision as a bank by a gov-
ernmental authority in the jurisdiction in
which the bank was organized or operates
and that (1) issues potential section
871(m) transactions to customers, and (2)
receives dividends with respect to stock or
dividend equivalent payments pursuant to
potential section 871(m) transactions that
hedge potential section 871(m) transac-
tions that it issued; or

(D) A foreign branch of a U.S. financial
institution, if the foreign branch would
meet the requirements of paragraph (A),
(B), or (C), if it were a separate entity.

Sec. 2.25. Excepted NFFE. "Excepted
NFFE" means a person described in
§ 1.1471-1(b)(41).

Sec. 2.26. Exempt Beneficial Owner.
"Exempt beneficial owner" means a per-
son described in § 1.1471-1(b)(42) and
includes any person that is treated as an
exempt beneficial owner under an appli-
cable Model 1 or Model 2 IGA.

Sec. 2.27. Exempt Recipient. For pur-
poses of Form 1099 reporting and backup
withholding, an "exempt recipient" means
a person described in § 1.6049-4(c)(1)(ii)
(for interest, dividends, and royalties), a
person described in § 1.6045-2(b)(2)(i)
(for broker proceeds), and a person de-
scribed in § 1.6041-3(q) (for rents,
amounts paid on notional principal con-
tracts, and other fixed or determinable in-
come), for which no Form 1099 reporting
is required. Exempt recipients are not ex-
empt from reporting or withholding under
chapter 3 or 4.

Sec. 2.28. FATCA Requirements as a
Participating FFI, Registered Deemed-
Compliant FFI, or Registered Deemed-
Compliant Model 1 IGA FFI. "FATCA
requirements as a participating FFI, regis-
tered deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI"
means-

(A) For a participating FFI or an FFI
that agrees to be treated as a participating

FFI, the requirements set forth in the FFI
agreement;

(B) For a registered deemed-compliant
FFI (other than a reporting Model 1 FFI)
or an FFI that agrees to be treated as a
registered deemed-compliant FFI, the re-
quirements under § 1.1471-5(f)(1) or an
applicable Model 2 IGA; or

(C) For a registered deemed-compliant
Model 1 IGA FFI, reporting Model 1 FFI,
or an FFI that agrees to be treated as a
registered deemed-compliant Model 1
IGA FFI or reporting Model 1 FFI, the
requirements under an applicable Model 1
IGA.

Sec. 2.29. Financial Institution (FI).
"Financial institution" or "FI" means an
entity described in § 1.1471-5(d) and in-
cludes a financial institution as defined
under an applicable Model 1 or Model 2
IGA.

Sec. 2.30. Foreign Financial Institu-
tion (FFI). "Foreign Financial Institu-
tion" or "FFI" means a foreign entity (as
defined in § 1.1473-1(e)) that is a finan-
cial institution.

Sec. 2.31. FFI Agreement. "FFI Agree-
ment" means an agreement described in
§ 1.1471-4(a) and provided in Rev. Proc.
2014-3, 2014-3 I.R.B. 419, as revised by
Rev. Proc. 2014-38, 2014-29 I.R.B. 131
(and any superseding revenue procedure).

Sec. 2.32. FFI Withholding State-
ment. An "FFI withholding statement"
means a withholding statement provided
by an FFI that meets the requirements of
§ 1.1471-3(c)(3)(iii)(B)(1) and (2).

Sec. 2.33. Flow-Through Entity. A
flow-through entity is a foreign partner-
ship described in § 301.7701-2 or 3 (other
than a withholding foreign partnership), a
foreign trust (other than a withholding for-
eign trust) that is described in section
651(a), or a foreign trust if all or a portion
of such trust is treated as owned by the
grantor or other person under sections 671
through 679. For an item of income for
which a treaty benefit is claimed, an entity is
also a flow-through entity to the extent it is
treated as fiscally transparent under section
894 and the regulations thereunder.

Sec. 2.34. Foreign Person. A "foreign
person" is any person that is not a "United
States person" and includes a "nonresi-
dent alien individual," a "foreign corpora-
tion," a "foreign partnership," a "foreign
trust," and a "foreign estate," as those

terms are defined in section 7701. For
purposes of chapters 3 and 4, the term
foreign person also means, with respect to
a payment by a withholding agent (includ-
ing a qualified intermediary), a foreign
branch (including a foreign disregarded
entity) of a U.S. person that provides a
valid Form W-8IMY on which it repre-
sents that it is a qualified intermediary. A
foreign branch of a U.S. person that is a
qualified intermediary is, however, a U.S.
payor for purposes of chapter 61 and sec-
tion 3406.

Sec. 2.35. Foreign TIN. A "foreign
TIN" is a taxpayer identification number
issued by a foreign person's country of
residence.

Sec. 2.36. Form W-8. "Form W-8"
means IRS Form W-8BEN, Certificate of
Foreign Status of Beneficial Owner for
United States Tax Withholding (Individu-
als); IRS Form W-8BEN-E, Certificate of
Status of Beneficial Owner for United
States Tax Withholding and Reporting
(Entities); IRS Form W-8ECI, Certificate
of Foreign Person's Claim That Income is
Effectively Connected With the Conduct of
a Trade or Business in the United States;
IRS Form W-8EXP, Certificate of For-
eign Government or Other Foreign Orga-
nization for United States Tax Withhold-
ing and Reporting; and IRS Form
W-8IMY, Certificate of Foreign Interme-
diary, Foreign Flow-Through Entity, or
Certain U.S. Branches for United States
Tax Withholding and Reporting, as appro-
priate. It also includes any acceptable sub-
stitute Form W-8.

Sec. 2.37. Form W-9. "Form W-9"
means IRS Form W-9, Request for Tax-
payer Identification Number and Certifi-
cation, or any acceptable substitute Form
W-9.

Sec. 2.38. Form 945. "Form 945"
means IRS Form 945, Annual Return of
Withheld Federal Income Tax.

Sec. 2.39. Form 1042. "Form 1042"
means IRS Form 1042, Annual Withhold-
ing Tax Return for U.S. Source Income of
Foreign Persons.

Sec. 2.40. Form 1042-S. "Form
1042-S" means IRS Form 1042-S, For-
eign Person's U.S. Source Income Subject
to Withholding.

Sec. 2.41. Form 1096. "Form 1096"
means IRS Form 1096, Annual Summary

and Transmittal of U.S. Information Re-
turns.

Sec. 2.42. Form 1099. "Form 1099"
means IRS Form 1099-B, Proceeds From
Broker and Barter Exchange Transac-
tions; IRS Form 1099-DIV, Dividends
and Distributions; IRS Form 1099-INT,
Interest Income; IRS Form 1099-MISC,
Miscellaneous Income; IRS Form 1099-
OID, Original Issue Discount; and any
other form in the IRS Form 1099 series
appropriate to the type of payment re-
quired to be reported.

Sec. 2.43. Form 8966. "Form 8966"
means IRS Form 8966, FATCA Report.

Sec. 2.44. Form 1099 Reporting.
"Form 1099 reporting" means the report-
ing required on Form 1099.

Sec. 2.45. Global Intermediary Iden-
tification Number (GIIN). "Global inter-
mediary identification number" or "GIIN"
means the identification number that is as
assigned to a participating FFI, registered
deemed-compliant FFI, direct reporting
NFFE, or sponsoring entity of a direct
reporting NFFE. The term also includes
the identification number assigned to a
reporting Model 1 FFI or registered
deemed-compliant Model 1 IGA FFI that
is a QI for the purpose of identifying itself
to withholding agents.

Sec. 2.46. Intermediary. An "interme-
diary" means any person that acts on be-
half of another person such as a custodian,
broker, nominee, or other agent.

Sec. 2.47. Know-Your-Customer
Rules. "Know-your-customer rules" re-
fers to the applicable laws, regulations,
rules, and administrative practices and
procedures, identified in the Attachments
to this Agreement, governing the require-
ments of QI to obtain documentation con-
firming the identity of QI's account holders.

Sec. 2.48. Marketable Securities. For
purposes of this Agreement, the term
"marketable securities" means those secu-
rities described in § 1.1441-6 for which a
U.S. TIN (or foreign TIN) is not required
to obtain treaty benefits.

Sec. 2.49. Non-Consenting U.S. Ac-
count. For purposes of a reporting Model
2 FFI, "non-consenting U.S. account" has
the meaning that such term has under an
applicable Model 2 IGA.

Sec. 2.50. Non-Exempt Recipient. A
"non-exempt recipient" means a person
that is not an exempt recipient under the

definition in section 2.27 of this Agree-
ment.

Sec. 2.51. Non-Financial Foreign En-
tity (NFFE). A "non-financial foreign en-
tity" or "NFFE" means a foreign entity
that is not a financial institution (including
an entity that is incorporated or organized
under the laws of any U.S. territory and
that is not a financial institution). The term
also means a foreign entity treated as an
NFFE pursuant to a Model 1 or Model 2
IGA.

Sec. 2.52. Nonparticipating FFI. A
"nonparticipating FFI" means an FFI
other than a participating FFI, a deemed-
compliant FFI, or an exempt beneficial
owner.

Sec. 2.53. Nonqualified Intermedi-
ary. A "nonqualified intermediary" is any
intermediary that is not a qualified inter-
mediary. A nonqualified intermediary in-
cludes any intermediary that is a foreign
person unless such person enters an agree-
ment to be a qualified intermediary and
acts in such capacity. A nonqualified in-
termediary also includes an intermediary
that is a territory FI (as defined section
2.83 of this Agreement) unless such insti-
tution agrees to be treated as a U.S. per-
son.

Sec. 2.54. Non-U.S. Payor. A “non-
U.S. payor" means a payor other than a
U.S. payor as defined in this section 2.90
of this Agreement.

Sec. 2.55. Nonwithholding Foreign
Partnership. A "nonwithholding foreign
partnership" means a foreign partnership
other than a withholding foreign partner-
ship as defined in § 1.1441-5(c)(2)(i).

Sec. 2.56. Nonwithholding Foreign
Trust. A "nonwithholding foreign trust"
means a foreign trust (as defined in sec-
tion 7701(a)(31)(B)) that is a foreign sim-
ple trust or a foreign grantor trust and that
is not a withholding foreign trust.

Sec. 2.57. Overwithholding. The term
"overwithholding" means any amount ac-
tually withheld (determined before appli-
cation of the adjustment procedures de-
scribed in section 9 of this Agreement)
from an item of income or other payment
that is in excess of:

(A) The amount required to be withheld
under chapter 4 with respect to such item
of income or other payment, if applicable,
and,

(B) In the case of an amount subject to
chapter 3 withholding, the actual tax lia-
bility of the beneficial owner of the income
or payment to which the withheld amount is
attributable, regardless of whether such
overwithholding was in error or appeared
correct at the time it occurred.

For purposes of section 3406, the term
"overwithholding" means the excess of
the amount actually withheld under sec-
tion 3406 over the amount required to be
withheld.

Sec. 2.58. Participating FFI. A "par-
ticipating FFI" means an FFI that has
agreed to comply with the requirements of
an FFI Agreement, including an FFI de-
scribed in a Model 2 IGA that has agreed
to comply with the requirements of an FFI
Agreement (reporting Model 2 FFI). The
term participating FFI also includes a QI
branch of a U.S. financial institution, unless
such branch is a reporting Model 1 FFI.

Sec. 2.59. Payee. For chapter 4 pur-
poses, a "payee" means a person de-
scribed in § 1.1471-3(a). For purposes of
chapter 61, a "payee" means the person to
whom a payment is made. For purposes of
chapter 3, a "payee" means a person de-
scribed in § 1.1441-1(c)(12).

Sec. 2.60. Payment. A "payment" is
considered made to a person if that person
realizes income, whether or not such in-
come results from an actual transfer of
cash or other property. See § 1.1441-2(e).
For example, a payment includes crediting
an amount to an account. For any payment
of a dividend equivalent or qualifying div-
idend equivalent offsetting payment, a
"payment" has the meaning provided in
§ 1.871-15(i). For any qualifying divi-
dend equivalent offsetting payment (not-
withstanding the limitation in section
2.70(B) of this Agreement), the payment
definition in § 1.871-15(i) is applied as if
the qualifying dividend equivalent offset-
ting payment (notwithstanding the limita-
tion in section 2.70(B) of this Agreement)
is a dividend equivalent.

Sec. 2.61. Payor. A "payor" is defined
in § 31.3406(a)-2 and § 1.6049-4(a)(2)
and generally means any person required
to make an information return under chap-
ter 61. The term includes any person that
makes a payment, directly or indirectly, to
QI and to whom QI provides information,
pursuant to this Agreement, so that such
person can report a payment on Form

1099 and, if appropriate, backup withhold.
See sections 3.05 and 3.06 of this Agree-
ment. Also see sections 2.90 and 2.54 of
this Agreement for the definition of U.S.
payor and non-U.S. payor.

Sec. 2.62. Permanent Residence Ad-
dress. A "permanent residence address"
means an address described in § 1.1441-
1(c)(38).

Sec. 2.63. Potential Section 871(m)
Transaction. A "potential section 871(m)
transaction" is any securities lending or
sale-repurchase transaction, notional prin-
cipal contract (NPC), or equity linked in-
strument (ELI) that references one or
more underlying securities. For purposes
of this definition, securities lending or
sale-repurchase transaction, NPC, ELI,
reference, and underlying security have
the meaning given to the terms in
§§ 1.871-15(a)(13), (7), (4), (11), and
(15), respectively.

Sec. 2.64. Presume/Presumption. The
terms "presume" and "presumption" refer
to the presumption rules set forth in sec-
tion 5.13(C) of this Agreement.

Sec. 2.65. Private Arrangement In-
termediary (PAI). A "private arrange-
ment intermediary" or "PAI" is an inter-
mediary described in section 4 of this
Agreement.

Sec. 2.66. Qualified Derivatives
Dealer (QDD). A "qualified derivatives
dealer" ("QDD") is an eligible entity that
agrees to meet the requirements of
§ 1.1441-1(e)(6)(i) and of this Agreement
with respect to payments on potential sec-
tion 871(m) transactions and underlying
securities that it receives or makes as a
principal. In order to act as a QDD, QI
must apply and be approved for QDD
status and must represent itself as a QDD
on its Form W-8IMY.

Sec. 2.67. QDD Tax Liability. A
"QDD tax liability" is the amount de-
scribed in section 3.09 of this Agreement.

Sec. 2.68. Qualified Intermediary. A
"qualified intermediary" is a person, de-
scribed in § 1.1441-1(e)(5)(ii), that has in
effect an agreement with the IRS to be
treated as a qualified intermediary and
acts as a qualified intermediary.

Sec. 2.69. Qualified Intermediary
(QI) EIN. A "qualified intermediary EIN"
or "QI-EIN" means the employer identi-
fication number assigned by the IRS to a
qualified intermediary. QI's QI-EIN is

only to be used when QI is acting as a
qualified intermediary. For example, QI
must give a withholding agent its EIN
(other than its QI-EIN), if any, if it is
receiving income as a beneficial owner
(excluding when it receives income as a
principal when acting as a QDD or as a
qualified intermediary assuming primary
withholding responsibility for a substitute
interest payment). QI must also use its
non-QI EIN, if any, when acting as a
nonqualified intermediary. Each signatory
to this Agreement must have its own QI-
EIN (to the extent referenced in this sec-
tion 2.69).

### Sec. 2.70. Qualifying Dividend Equivalent Offsetting Payment.

(A) In General. For purposes of a QI
that is acting as a QDD, a "qualifying
dividend equivalent offsetting payment"
means:

(1) Any payment made with respect to
a potential section 871(m) transaction to a
U.S. person that would be a dividend
equivalent payment if the payment were
made to a foreign person or

(2) Any payment made with respect to
a potential section 871(m) transaction to a
foreign person that would be a dividend
equivalent payment if the payment was
not treated as income effectively con-
nected with the conduct of a trade or busi-
ness within the United States within the
meaning of section 864.

(B) Exception. To the extent a QI act-
ing as a QDD does not obtain a waiver
and collect and maintain information, as
required by section 8.03(C) of this Agree-
ment, from a U.S. non-exempt recipient
described in section 2.70(A)(1), any pay-
ment made to such person is not a quali-
fying dividend equivalent offsetting pay-
ment.

Sec. 2.71. Recalcitrant Account
Holder. A "recalcitrant account holder"
means an account holder described in
§ 1.1471-5(g).

Sec. 2.72. Reduced Rate of With-
holding. A "reduced rate of withholding"
means a rate of withholding under chapter
3 that is less than 30 percent, including an
exemption from withholding.

Sec. 2.73. Reliably Associating a Pay-
ment With Documentation. See section
5.13(B) of this Agreement to determine

whether QI can reliably associate a pay-
ment with documentation.

Sec. 2.74. Reportable Amount. A "re-
portable amount" means U.S. source
FDAP income that is an amount subject to
chapter 3 withholding (as defined in sec-
tion 2.04 of this Agreement), U.S. source
deposit interest (as defined in section 2.18
of this Agreement), and U.S. source inter-
est or original issue discount paid on the
redemption of short-term obligations (as
defined in section 2.81 of this Agree-
ment). The term does not include pay-
ments on deposits with banks and other
financial institutions that remain on de-
posit for two weeks or less. It also does
not include amounts of original issue dis-
count arising from a sale and repurchase
transaction completed within a period of
two weeks or less, or amounts described
in § 1.6049-5(b)(7), (10), or (11) (relating
to certain foreign targeted registered obli-
gations and certain obligations issued in
bearer form).

Sec. 2.75. Reportable Payment. For
purposes of this Agreement, a "reportable
payment" means an amount described in
section 2.75(A) of this Agreement, in the
case of a U.S. payor, and an amount de-
scribed in section 2.75(B) of this Agree-
ment, in the case of a non-U.S. payor.

(A) U.S. Payor. If QI is a U.S. payor,
a "reportable payment" means, unless an
exception to reporting applies under chap-
ter 61,-

(1) Any reportable amount;

(2) Any broker proceeds from a sale
reportable under § 1.6045-1(c); and

(3) Any foreign source interest, divi-
dends, rents, royalties, or other fixed and
determinable income.

(B) Non-U.S. Payor. If QI is a non-
U.S. payor, a "reportable payment"
means, unless an exception to reporting
applies under chapter 61, -

(1) Any reportable amount;

(2) Any broker proceeds from a sale ef-
fected at an office inside the United States,
as defined in § 1.6045-1(g)(3)(iii); and
(3) Any foreign source interest, dividends,
rents, royalties, or other fixed and deter-
minable income if such income is not paid
outside the United States as described un-
der section 5.13(C)(1) of this Agreement.

Sec. 2.76. Reporting Model 1 FFI. A
"reporting Model 1 FFI" means an FFI
with respect to which a foreign govern-

ment or agency thereof agrees to obtain
and exchange information pursuant to a
Model 1 IGA, other than an FFI that is
treated as a nonreporting Model 1 FFI
(including a registered deemed-compliant
Model 1 IGA FFI) or a nonparticipating
FFI under an applicable Model 1 IGA.

Sec. 2.77. Reporting Pool. A "report-
ing pool" is defined in section 8 of this
Agreement.

Sec. 2.78. Responsible Officer. A "re-
sponsible officer" of a QI means an officer
of the QI with sufficient authority to fulfill
the duties of a responsible officer as de-
scribed in section 10 of this Agreement,
including the requirements to periodically
certify and to respond to requests by the
IRS for additional information to review
the QI's compliance (or that of a PAI).

Sec. 2.79. Section 871(m) Amount. A
"section 871(m) amount" means the sum
of the amounts by which, for each divi-
dend on each underlying security, (A) the
dividends on underlying securities associ-
ated with potential section 871(m) transac-
tions and dividend equivalent payments that
QI acting as a QDD receives in its dealer
capacity exceed (B) the dividend equivalent
payments and the qualifying dividend
equivalent offsetting payments that QI act-
ing as a QDD makes or is contractually
obligated to make with respect to the same
dividend in its dealer capacity.

For purposes of determining the QDD
tax liability, a dividend or dividend equiv-
alent is treated as received by a QDD
acting in its non-dealer capacity if the
dividend or dividend equivalent is re-
ceived by a QDD acting as a proprietary
trader. Transactions properly reflected in a
QDD's dealer book are presumed to be
held by a dealer in its dealer capacity for
purposes of determining the QDD tax li-
ability. In addition, for purposes of deter-
mining whether a dealer is acting in its
dealer capacity, only the dealer's activities
as a derivatives dealer are taken into ac-
count.

Sec. 2.80. Section 871(m) Transac-
tion. A "section 871(m) transaction" is
any securities lending or sale-repurchase
transaction, specified NPC, or specified
ELI described in § 1.871-15(a)(13), (d),
and (e), respectively.

Sec. 2.81. Short-Term Obligation. A
"short-term obligation" is any obligation
described in section 871(g)(1)(B)(i).

Sec. 2.82. Substitute Interest. "Sub-
stitute interest" means a substitute interest
payment described in § 1.861-2(a)(7).

Sec. 2.83. Territory FI. A "territory
FI" means a financial institution that is
incorporated or organized under the laws
of any U.S. territory, excluding a territory
entity that is an investment entity but is
not a depository institution, custodial in-
stitution, or specified insurance company
(as defined in § 1.1471-5(e)(1)(i), (ii), and
(iv), respectively).

Sec. 2.84. Underlying Security. For
purposes of a QI acting as a QDD or any
determination relating to section 871(m),
"underlying security" has the meaning
provided in § 1.871-15(a)(15).

Sec. 2.85. Underlying Security Asso-
ciated with Potential Section 871(m)
Transactions. For purposes of a QI acting
as a QDD, "underlying security associated
with potential section 871(m) transac-
tions" means any underlying security held
by a QDD to manage risk of price changes
with respect to a potential section 871(m)
transactions that the QDD entered into in
the normal course of its business as a
dealer.

Sec. 2.86. Underwithholding. “Un-
derwithholding" means the excess of the
amount required to be withheld under
chapter 3 or 4 or section 3406 over the
amount actually withheld.

Sec. 2.87. Undocumented Account
Holder. An "undocumented account
holder" is an account holder for whom QI
does not hold valid documentation.

Sec. 2.88. U.S. Account. A "U.S. ac-
count" is any financial account maintained
by an FFI that is held by one or more
specified U.S. persons or U.S .- owned for-
eign entities that such FFI reports or elects
to report under the FFI Agreement or
§ 1.1471-5(f), as applicable.

Sec. 2.89. U.S. Branch Treated as a
U.S. Person. A "U.S. branch treated as a
U.S. person" means a U.S. branch of a
participating FFI, registered deemed-
compliant FFI, or NFFE that is treated as a
U.S. person under § 1.1441-1(b)(2)(iv)(A).

Sec. 2.90. U.S. Payor. The term "U.S.
payor" has the same meaning as in
§ 1.6049-5(c)(5).

Sec. 2.91. U.S. Person. A "U.S. per-
son" (or "United States person") is a per-
son described in section 7701(a)(30), the
U.S. government (including an agency or

instrumentality thereof), a State of the
United States (including an agency or in-
strumentality thereof), or the District of
Columbia (including an agency or instru-
mentality thereof). An individual will not
be treated as a U.S. person for purposes of
this section for a taxable year or any por-
tion of a taxable year that the individual is
a dual resident taxpayer (within the mean-
ing of § 301.7701(b)-7(a)(1)) who is
treated as a nonresident alien pursuant to
§ 301.7701(b)-7 for purposes of comput-
ing his or her U.S. tax liability. The term
"U.S. person" or "United States person"
also means a foreign insurance company
that has made an election under section
953(d), provided that either the foreign
insurance company is not a specified in-
surance company (as described in
§ 1.1471-5(e)(1)(iv)), or the foreign in-
surance company is a specified insurance
company and is licensed to do business in
any State of the United States.

Sec. 2.92. U.S. Reportable Account.
A "U.S. reportable account" means a fi-
nancial account maintained by a reporting
Model 1 FFI or registered deemed-
compliant Model 1 IGA FFI that such FFI
reports or elects to report under the appli-
cable domestic law for compliance with
and implementation of FATCA.

Sec. 2.93. U.S. Source FDAP. "U.S.
source FDAP" means amounts from
sources within the United States that con-
stitute fixed or determinable annual or pe-
riodical income, as defined in § 1.1441-
2(b)(1).

Sec. 2.94. U.S. TIN. A "U.S. TIN"
means a U.S. taxpayer identification num-
ber assigned under section 6109.

Sec. 2.95. Withholding Agent. A
"withholding agent" has the same mean-
ing as set forth in § 1.1441-7(a) for pur-
poses of chapter 3 and as set forth in
§ 1.1473-1(d) for purposes of chapter 4,
and includes a payor (as defined in section
2.61 of this Agreement). As used in this
Agreement, the term generally refers to
the person making a payment to a quali-
fied intermediary.

Sec. 2.96. Withholding Foreign Part-
nership. A "withholding foreign partner-
ship" or "WP" means a partnership, de-
scribed in § 1.1441-5(c)(2), that has
entered into a withholding agreement with
the IRS to be treated as a withholding
foreign partnership.

Sec. 2.97. Withholding Foreign
Trust. A "withholding foreign trust" or
"WT" means a trust, described in
§ 1.1441-5(e)(5)(v), that has entered into
a withholding agreement with the IRS to
be treated as a withholding foreign trust.

Sec. 2.98. Withholdable Payment. A
"withholdable payment" means an
amount described in § 1.1473-1(a).

Sec. 2.99. Withholding Rate Pool. A
"withholding rate pool" is defined in sec-
tion 6.03 of this Agreement and includes a
chapter 3 withholding rate pool and a
chapter 4 withholding rate pool.

Sec. 2.100. Withholding Statement.
The term "withholding statement" is de-
fined in section 6.02 of this Agreement.

Sec. 2.101. Other Terms. Any term
not defined in this section has the same
meaning that it has under the Code, in-
cluding the income tax regulations under
the Code, any applicable income tax
treaty, or any applicable Model 1 or
Model 2 IGA with respect to a QI's
FATCA requirements as a participating
FFI, registered deemed-compliant FFI, or
registered deemed-compliant Model 1
IGA FFI. Except as expressly provided in
this Agreement, any term relating to a
QDD or section 871(m) has the same
meaning given to the term in § 1.871-15.

## SECTION 3. WITHHOLDING RESPONSIBILITY AND QDD TAX LIABILITY

### Sec. 3.01. Chapters 3 and 4 Withholding Responsibilities.

(A) Chapter 4 Withholding. QI is a
withholding agent for purposes of chapter
4 and subject to the withholding and re-
porting provisions applicable to withhold-
ing agents under sections 1471 and 1472
with respect to its accounts. QI is required
to withhold 30 percent of any withhold-
able payment made after June 30, 2014, to
an account holder that is an FFI unless
either QI can reliably associate the pay-
ment (or portion of the payment) with
documentation upon which it is permitted
to rely to treat the payment as exempt
from withholding under § 1.1471-2(a)(4)
or the payment is made under a grandfa-
thered obligation described in § 1.1471-
2(b). See § 1.1471-2(b)(2)(i)(A)(2) for
the definition of grandfathered obligation
with respect to an obligation giving rise to

a dividend equivalent. QI is also required
to withhold 30 percent of any withhold-
able payment made after June 30, 2014, to
an account holder that is an NFFE unless
either QI can reliably associate the pay-
ment (or portion of the payment) with a
certification described in § 1.1472-
1(b)(1)(ii) or an exception to withholding
under § 1.1472-1 otherwise applies.

If QI is a participating FFI or registered
deemed-compliant FFI (other than a re-
porting Model 1 FFI), QI will satisfy its
requirement to withhold under sections
1471(a) and 1472(a) with respect to direct
account holders that are entities by with-
holding on withholdable payments made
to nonparticipating FFIs and recalcitrant
account holders to the extent required un-
der its FATCA requirements as a partici-
pating FFI or registered deemed-
compliant FFI. See the FFI Agreement,
§ 1.1471-5(f)(1), or the applicable Model
2 IGA for the withholding requirements
that apply to withholdable payments made
to account holders of the FFI that are
individuals treated as recalcitrant account
holders or non-consenting accounts. If QI
is a reporting Model 1 FFI or a registered
deemed-compliant Model 1 IGA FFI, QI
will satisfy its requirement to withhold
under section 1471(a) with respect to di-
rect account holders by withholding on
withholdable payments made to nonpar-
ticipating FFIs to the extent required un-
der its FATCA requirements as a regis-
tered deemed-compliant FFI or registered
deemed-compliant Model 1 IGA FFI. QI
must, however, withhold in the manner
described in sections 3.02 and 3.03 of this
Agreement for when QI assumes or does
not assume primary withholding responsi-
bility for purposes of chapters 3 and 4
regardless of its chapter 4 status.

(B) Chapter 3 Withholding. To the
extent that QI makes a payment of an
amount subject to chapter 3 withholding,
QI is required to withhold 30 percent of
the gross amount of any such payment
made to an account holder that is (or is
presumed) a foreign person unless QI can
reliably associate the payment with docu-
mentation upon which it can rely to treat
the payment as made to a payee that is a
U.S. person or as made to a beneficial
owner that is a foreign person entitled to a
reduced rate of withholding. See section 5
of this Agreement regarding documenta-

tion requirements. With respect an amount
subject to chapter 4 withholding that is
also an amount subject to chapter 3 with-
holding, QI may credit any tax withheld
under chapter 4 against its liability for any
tax due under chapter 3 with respect to the
payment so that no additional withholding
is required on the payment for purposes of
chapter 3. Nothing in chapter 4 or the
regulations thereunder (including the FFI
Agreement) or any applicable IGA re-
lieves QI of its requirements to withhold
under chapter 3 to the extent required in
this Agreement.

Sec. 3.02. Primary Chapters 3 and 4
Withholding Responsibility Not As-
sumed. Notwithstanding sections 1.01
and 3.01 of this Agreement, QI is not be
required to withhold with respect to a pay-
ment of U.S. source FDAP income if it (a)
does not assume primary withholding re-
sponsibility under section 3.03 of this
Agreement by electing to be withheld
upon under § 1.1471-2(a)(2)(iii) for pur-
poses of chapter 4, (b) provides the with-
holding agent from which QI receives the
payment with a valid withholding certifi-
cate that indicates that QI does not assume
primary withholding responsibility for
chapters 3 and 4 purposes, and (c) pro-
vides correct withholding statements (in-
cluding information regarding any ac-
count holders or interest holders of an
intermediary or flow-through entity that
holds an account with QI, other than a
qualified intermediary that assumes pri-
mary withholding responsibility, with-
holding foreign partnership, or withhold-
ing foreign trust) as described in section
6.02 of this Agreement. However, QI that
is acting as a QDD must assume primary
withholding responsibility to the extent
required under section 3.03(B) of this
Agreement. Notwithstanding its election
not to assume primary withholding re-
sponsibility under chapters 3 and 4, QI
shall, however, withhold the difference
between the amount of withholding re-
quired under chapter 3 or 4 and the
amount actually withheld by another with-
holding agent if QI-

(A) Actually knows that the appropri-
ate amount has not been withheld by an-
other withholding agent; or

(B) Made an error which results in the
withholding agent's failure to withhold
the correct amount due (e.g., QI fails to

provide an accurate withholding statement
with respect to the payment, including a
failure to provide information regarding
any account holders or interest holders of
an intermediary or flow-through entity
that holds an account with QI to the extent
required in section 6 of this Agreement)
and QI has not corrected the underwith-
holding under section 9.05 of this Agree-
ment. QI is not required to withhold on an
amount that it pays to another qualified
intermediary that has assumed primary
withholding responsibility with respect to
the payment or to a withholding foreign
partnership or withholding foreign trust.
See section 8 of this Agreement regarding
QI's responsibility to report amounts sub-
ject to withholding under chapter 3 or 4 on
Form 1042-S.

### Sec. 3.03. Assumption of Primary Chapters 3 and 4 Withholding Responsibility.

(A) In General. QI, upon notification to
a withholding agent, may assume primary
withholding responsibility for purposes of
chapters 3 and 4 by providing a valid
withholding certificate described in sec-
tion 6 of this Agreement to a withholding
agent that makes a payment of U.S. source
FDAP income to QI and by designating
on the withholding statement associated
with such certificate the account(s) for
which QI assumes primary withholding
responsibility. QI may assume primary
withholding responsibility without in-
forming the IRS. QI is not required to
assume primary withholding responsibil-
ity for all accounts it holds with the with-
holding agent. If QI assumes primary
withholding responsibility for any ac-
count, it must assume that responsibility
under chapters 3 and 4 for all withhold-
able payments and amounts subject to
chapter 3 withholding made by the with-
holding agent to that account. QI may
assume primary withholding responsibil-
ity for U.S. source FDAP payments of
substitute interest as described in § 1.861-
2(a)(7). If QI assumes primary withhold-
ing responsibility for payments of substi-
tute interest (as described in this
paragraph), it must assume primary with-
holding responsibility with respect to all
such payments. QI assumes primary with-
holding responsibility for payments of
substitute interest for purposes of this

Agreement when it assumes such respon-
sibility for payments of interest and sub-
stitute interest it receives in connection
with a sale-repurchase or similar agree-
ment, a securities lending transaction, or
collateral that it holds in connection with
its activities as a dealer in securities. As a
result, QI may represent its status as a
qualified intermediary on the withholding
certificate described in section 6.01 of this
Agreement with respect to payments it
receives of interest and substitute interest
described in the preceding sentence re-
gardless of whether it acts as an interme-
diary or as a principal with respect to
these payments.

To the extent that QI assumes primary
withholding responsibility, QI shall with-
hold as described in section 3.01 of this
Agreement. QI is not required to withhold
on amounts it pays to another qualified
intermediary that has assumed primary
withholding responsibility with respect to
the payment (including a qualified inter-
mediary acting as a QDD) or to a with-
holding foreign partnership or a withhold-
ing foreign trust. See section 8 of this
Agreement regarding QI's responsibility
to report amounts subject to withholding
on Form 1042-S.

(B) Assumption of Withholding Re-
sponsibility by a QDD. If QI is acting as
a QDD, it must assume primary chapters 3
and 4 withholding responsibility for any
dividend equivalent payment that it makes
and must withhold with respect to a divi-
dend equivalent payment on the dividend
payment date for the applicable dividend
(as determined in § 1.1441-2(e)(4)). A
QDD must also assume primary chapter 3
and chapter 4 withholding responsibility
for payments made with respect to a po-
tential section 871(m) transaction even if
the payment is not a dividend equivalent if
the amount paid is an amount subject to
chapter 3 or 4 withholding. A QDD is not
required to withhold under chapter 3 or 4
on amounts it pays to another qualified
intermediary that has assumed primary
withholding responsibility with respect to
the payment, or to a withholding foreign
partnership or a withholding foreign trust.
See section 8 of this Agreement regarding
QDD's responsibility to report dividend
equivalent payments and other amounts
subject to withholding on Form 1042-S.

### Sec. 3.04. Backup Withholding Under Section 3406 and Form 1099 Reporting Responsibility.

(A) Backup Withholding. QI is a payor
under section 3406 with respect to report-
able payments. Under section 3406, un-
less an exception to backup withholding
applies, a payor is required to deduct and
withhold 282 percent from a reportable
payment to an account holder that is a
U.S. non-exempt recipient if the U.S. non-
exempt recipient has not provided its U.S.
TIN in the manner required under that
section; the IRS notifies the payor that the
U.S. TIN furnished by the payee is incor-
rect; there has been a notified payee
under-reporting described in section
3406(c); or there has been a payee certi-
fication failure described in section
3406(d).

(B) Coordination of Chapter 4 With-
holding and Backup Withholding. With
respect to a withholdable payment that is
also a reportable payment subject to
backup withholding under section 3406,
QI is not required to withhold under sec-
tion 3406 if QI withheld on such payment
under chapter 4. See § 31.3406(g)-1(e).
Alternatively, if QI is a participating FFI
or a registered deemed-compliant FFI
(other than a reporting Model 1 FFI), it
may elect to satisfy its obligation to with-
hold under chapter 4 (or the FFI Agree-
ment) on a withholdable payment made to
a recalcitrant account holder that is a U.S.
non-exempt recipient by satisfying its
backup withholding obligation under sec-
tion 3406 provided that the payment is
also a reportable payment. See section 4
of the FFI Agreement. Nothing in chapter
4 (including the FFI Agreement) or any
applicable IGA relieves QI of its require-
ments to backup withhold under section
3406 to the extent required by this Agree-
ment.

(C) Form 1099 Reporting. If QI ap-
plies backup withholding (as described in
section 3.04(B) of this Agreement), it
must report the amount subject to backup
withholding on Form 1099 and not on
Form 1042-S.

Sec. 3.05. Primary Form 1099 Re-
porting and Backup Withholding Re-
sponsibility for Reportable Payments

Other Than Reportable Amounts. QI is
responsible for reporting on Form 1099
and backup withholding on reportable
payments other than reportable amounts
to the extent required under this section
3.05 and section 8.06 of this Agreement,
whether or not QI assumes primary Form
1099 reporting and backup withholding
responsibility with respect to reportable
amounts under section 3.07 of this Agree-
ment. Further, no provision of this Agree-
ment which requires QI to provide another
withholding agent with information re-
garding reportable amounts shall be con-
strued as relieving QI of its Form 1099
reporting and backup withholding obliga-
tions with respect to reportable payments
that are not reportable amounts.

See, however, § 31.3406(g)-1(e) pro-
viding that a payor (irrespective of
whether the payor is a U.S. or non-U.S.
payor) is not required to backup withhold
under section 3406 on a reportable pay-
ment that is paid and received outside the
United States with respect to an offshore
obligation or on gross proceeds from a
sale effected outside the United States,
unless the payor has actual knowledge
that the payee is a U.S. person.

(A) U.S. Payor. Except as provided in
section 3.05(C) of this Agreement, if QI is
a U.S. payor, QI has primary Form 1099
reporting and backup withholding respon-
sibility for reportable payments other than
reportable amounts. For example, if QI is
a U.S. payor, it has primary Form 1099
reporting and backup withholding respon-
sibility for payments of foreign source
income as well as all broker proceeds paid
to account holders that are, or are pre-
sumed to be, U.S. non-exempt recipients.

(B) Non-U.S. Payor. If QI is a non-
U.S. payor, QI has primary Form 1099
reporting and backup withholding respon-
sibility for broker proceeds described in
section 2.75(B)(2) of this Agreement and
foreign source fixed and determinable in-
come other than income paid and received
outside United States as described in sec-
tion 2.75(B)(3) of this Agreement, if such
payments are made (or presumed made) to
U.S. non-exempt recipients.

financial institution or another qualified
intermediary to report on Form 1099 and,
if required, backup withhold with respect
to broker proceeds from a sale that is
effected at an office outside the United
States (as defined in § 1.6045-1(g)(3)(iii))
that QI is otherwise required to report
under section 3.05(A) and section 8.05 of
this Agreement, provided the other payor
actually receives the broker proceeds. In
such a case, QI will not be responsible for
primary Form 1099 reporting and backup
withholding with respect to broker pro-
ceeds, provided that the other payor
agrees to do the reporting and backup
withholding and QI provides all of the
information necessary for the other payor
to properly report and backup withhold.
QI, however, remains responsible for pri-
mary Form 1099 reporting and backup
withholding if the other payor does not
agree to report and backup withhold, or if
QI knows that the other payor failed to do
so. If, however, QI is a participating FFI
or registered deemed-compliant FFI
(other than a reporting Model 1 FFI) that
reports an account on Form 1099 in order
to satisfy its U.S. account reporting re-
quirement under chapter 4, as described in
section 8.04 of this Agreement, QI is re-
sponsible for reporting on Form 1099 with
respect to reportable payments made to
such U.S. account and must report in the
manner described in the FFI Agreement.

(D) Special Procedure for QDDs. QI
acting as a QDD must assume primary
Form 1099 reporting and backup with-
holding responsibility for any payments
made with respect to a potential section
871(m) transaction that are reportable
payments. Thus, for example, if QI acts as
a QDD with respect to an NPC that is a
potential section 871(m) transaction and
makes a payment pursuant to the NPC to
a U.S. person that is a U.S. non-exempt
recipient, QI must backup withhold and
report any amount paid to the U.S. person
to the extent required under section 3406
and § 1.6041-1(d)(5). See also section
8.03(C) of this Agreement for a QDD's
Form 1042-S reporting requirements for a
qualifying dividend equivalent offsetting
payment (notwithstanding the limitation
in section 2.70(B) of this Agreement).

2See section 3406(a) providing that the current applicable rate of backup withholding is the fourth lowest rate of tax applicable under section 1(c).

Sec. 3.06. Primary Form 1099 Re-
porting and Backup Withholding Re-
sponsibility For Reportable Amounts
Not Assumed. Notwithstanding sections
1.01 and 3.04 of this Agreement, QI shall
not be required to report on Form 1099
and, if required, backup withhold with
respect to a reportable amount if QI does
not assume primary Form 1099 reporting
and backup withholding responsibility
and it provides a payor from which it
receives a reportable amount the Forms
W-9 of its U.S. non-exempt recipient ac-
count holders (or, if a U.S. non-exempt
recipient fails to provide a Form W-9,
information regarding the account hold-
er's name, address, and U.S. TIN, if a U.S.
TIN is available) together with the with-
holding rate pools (as defined in section
6.03(D) of this Agreement) attributable to
U.S. non-exempt recipient account hold-
ers so that such payor may report on Form
1099 and, if required, backup withhold. If
QI elects to backup withhold on withhold-
able payments that are also reportable
amounts made to recalcitrant account
holders that are also U.S. non-exempt re-
cipients, QI shall not be required to report
on Form 1099 and backup withhold with
respect to a reportable amount if it pro-
vides a payor from which it receives a
reportable amount information regarding
such recalcitrant account holders. See sec-
tion 6.03 of this Agreement and section 4
of the FFI Agreement. If QI reports its
U.S. accounts on Forms 1099 under its
FATCA requirements as a participating
FFI or registered deemed-compliant FFI,
see section 8.04(A) of this Agreement
providing that QI cannot delegate to a
withholding agent its requirement to re-
port its U.S. accounts. See sections 3.04
and 8.06 of this Agreement for QI's obli-
gations regarding Form 1099 reporting
and backup withholding with respect to
reportable amounts and see also section
6.03 of this Agreement for when QI may
provide a chapter 4 withholding rate pool
of U.S. payees. If QI elects not to assume
primary Form 1099 reporting and backup
withholding responsibility, QI must pro-
vide the withholding agent with such in-
formation regarding any account holders
or interest holders of an intermediary or
flow-through entity that holds an account
with QI. See also sections 3.05(D) and
3.07 of this Agreement requiring a QI

acting as a QDD for payments with re-
spect to potential section 871(m) transac-
tions to assume primary Form 1099 and
backup withholding responsibility for
such amounts. Notwithstanding its elec-
tion not to assume primary Form 1099
reporting and backup withholding respon-
sibility, QI shall backup withhold and re-
port a reportable amount to the extent
required under sections 3.04 and 8.06 of
this Agreement if-

(A) QI actually knows that a reportable
amount is subject to backup withholding
and that another payor failed to apply
backup withholding, or

(B) Another payor has not applied backup
withholding to a reportable amount be-
cause of an error made by QI (e.g., QI
failed to provide the other payor with in-
formation regarding the name, address,
U.S. TIN (if available), and withholding
rate pool for a U.S. non-exempt recipient
account holder subject to backup with-
holding, including a failure to provide in-
formation regarding any account holders
or interest holders of an intermediary or
flow-through entity that holds an account
with QI to the extent required in section 6
of this Agreement).

QI is not required to backup withhold,
however, on a reportable amount that QI
makes to a withholding foreign partner-
ship, withholding foreign trust, or another
qualified intermediary that has assumed
primary Form 1099 reporting and backup
withholding responsibility with respect to
the payment. QI is also not required to
backup withhold on a reportable amount
that QI makes to an intermediary or flow-
through entity that is a participating FFI,
registered deemed-compliant FFI, or an-
other qualified intermediary that does not
assume primary Form 1099 reporting and
backup withholding responsibility with
respect to the payment provided that such
intermediary or flow-through entity allo-
cates the payment on its withholding
statement to a chapter 4 withholding rate
pool of U.S. payees and the withholding
statement is associated with a valid Form
W-8IMY that provides the applicable
certification(s) for allocating the payment
to this pool or allocates the payment on its
withholding statement to a chapter 4 with-
holding rate pool of recalcitrant account
holders. See section 3.05 of this Agree-
ment for backup withholding responsibil-

ity for reportable payments other than re-
portable amounts. See section 8.06 of this
Agreement regarding QI's responsibility
to report reportable payments on Form
1099.

Sec. 3.07. Assumption of Primary
Form 1099 Reporting and Backup
Withholding Responsibility. QI may as-
sume primary Form 1099 reporting re-
sponsibility and primary backup with-
holding responsibility with respect to
reportable amounts without approval from
the IRS. See sections 3.04 and 8.06 of this
Agreement for QI's obligations regarding
Form 1099 reporting and backup with-
holding with respect to reportable
amounts. QI that assumes such responsi-
bility is subject to all of the obligations
imposed by chapter 61 and section 3406,
as modified by this Agreement, and QI
shall be subject to any applicable penalties
for failure to meet those obligations. QI
shall inform a payor from which it re-
ceives a reportable amount that it has as-
sumed primary Form 1099 reporting and
backup withholding responsibility by pro-
viding the payor with a valid withholding
certificate described in section 6 of this
Agreement and by designating on the
withholding statement associated with
such certificate the account(s) for which
QI assumes primary Form 1099 reporting
and backup withholding responsibility. QI
may assume primary Form 1099 reporting
and backup withholding responsibility
without informing the IRS.

QI is not required to assume primary
Form 1099 reporting and backup with-
holding responsibility for all accounts it
holds with a payor. However, if QI as-
sumes primary Form 1099 reporting and
backup withholding responsibility for any
account, it must assume that responsibility
for all reportable amounts made by a
payor to that account.

If QI is acting as a QDD, it must as-
sume primary Form 1099 reporting and
backup withholding responsibility with
respect to any payment made with respect
to a potential section 871(m) transaction,
provided that the amount is a reportable
payment. In addition, if QI is assuming
primary withholding responsibility for
payments of substitute interest (as de-
scribed in section 3.03(A) of this Agree-
ment), it must assume primary Form 1099

reporting and backup withholding respon-
sibility with respect to all such payments.

QI shall not be required to backup
withhold on a reportable amount it makes
to a withholding foreign partnership, with-
holding foreign trust, or another qualified
intermediary that has assumed primary
Form 1099 reporting and backup with-
holding responsibility with respect to the
reportable amount. QI is also not required
to backup withhold on a reportable
amount that QI makes to an intermediary
or flow-through entity that is a participat-
ing FFI, registered deemed-compliant
FFI, or another qualified intermediary that
does not assume primary Form 1099 re-
porting and backup withholding responsi-
bility with respect to the payment pro-
vided that such intermediary or flow-
through entity allocates the payment on its
withholding statement to a chapter 4 with-
holding rate pool of U.S. payees and the
withholding statement is associated with a
valid Form W-8IMY that provides the
applicable certification(s) for allocating
the payment to this pool or allocates the
payment on its withholding statement to a
chapter 4 withholding rate pool of recal-
citrant account holders. See section 8 of
this Agreement regarding QI's responsi-
bility to report reportable payments on
Form 1099.

Sec. 3.08. Deposit Requirements. If
QI assumes primary withholding respon-
sibility under chapters 3 and 4 or primary
Form 1099 reporting and backup with-
holding responsibility, it must deposit
amounts withheld under chapter 3 or 4 or
section 3406 at the time and in the manner
provided under section 6302 (see
§ 1.6302-2) by electronic funds transfer
as provided under § 31.6302-1(h). If QI is
a non-U.S. payor that does not assume
primary withholding responsibility under
chapters 3 and 4 or primary Form 1099
reporting and section 3406 backup with-
holding responsibility, QI must deposit
amounts withheld by the 15th day follow-
ing the month in which the withholding
occurred.

If QI is acting as a QDD, it must also
make deposits with respect to its QDD tax
liability. At the time the QDD determines
that it has a QDD tax liability (as de-
scribed in section 3.09(D) of this Agree-
ment), it must deposit any tax for which it
is liable at the time and in the manner

provided under section 6302 (see
§ 1.6302-2) (substituting the term "QDD"
for "withholding agent" and "sections
871(a) and 881" for "chapter 3" and "due
under sections 871 and 881" for "withheld
pursuant to chapter 3") by electronic
funds transfer as provided in § 31.6302-
1(h). See section 3.09(D) of this Agree-
ment for the timing for determining the
QDD tax liability. The deposit require-
ments under section 6302 and § 1.6302-2
apply separately to amounts due for a
QDD's QDD tax liability and any
amounts withheld under chapters 3 and 4.

Sec. 3.09. QDD Tax Liability. In ad-
dition to satisfying its withholding tax li-
ability as described in this Agreement, a
QDD must satisfy its QDD tax liability.
The QDD's QDD tax liability is the sum
of its tax liability under sections 871(a)
and 881, if any, for:

(A) its section 871(m) amount (as de-
fined in section 2.79 of this Agreement)
for amounts received and made as a QDD
in its dealer capacity;

(B) its dividends that are not on under-
lying securities associated with potential
section 871(m) transactions and its divi-
dend equivalent payments received as a
QDD in its non-dealer capacity; and

(C) any payments, such as interest, re-
ceived as a QDD with respect to potential
section 871(m) transactions or underlying
securities that are not dividend or divi-
dend equivalent payments.

A QDD that is a foreign branch of a
U.S. financial institution does not have a
QDD tax liability and is not required to
report such liability on Form 1042. In-
stead, such a QDD must determine and
report its tax liability in accordance with
chapter 1 and the appropriate income tax
return filing obligations for the U.S. cor-
poration.

(D) Timing for Determining QDD
Tax Liability. A QDD must determine its
QDD tax liability due under sections
3.09(A) and (B) for each underlying secu-
rity and section 871(m) transaction on the
date that a dividend is paid on the under-
lying security, as provided in § 1.1441-
2(e)(4). A QDD must determine its QDD
tax liability due under section 3.09(C) at
the time such payments are made, as pro-
vided in § 1.1441-2(e).

See section 7.01(C) of this Agreement
regarding QI that is acting as a QDD's

responsibility to report on Form 1042 its
QDD tax liability and to maintain a rec-
onciliation schedule for its section 871(m)
amount and other amounts related to its
QDD tax liability.

## SECTION 4. PRIVATE ARRANGEMENT INTERMEDIARIES AND CERTAIN PARTNERSHIPS AND TRUSTS

Sec. 4.01. Private Arrangement In-
termediaries-In General. If QI is an FFI,
QI may enter into a private arrangement
with another intermediary under which
the other intermediary agrees to perform
all of the obligations of QI under this
Agreement, except as modified in section
4.03 of this Agreement. QI, however,
when acting as a QDD may not enter into
a private arrangement under this section
4.01 with any account holder for which it
acts as a QDD. The agreement between QI
and the other intermediary shall be be-
tween QI and all the offices of the other
intermediary located in a specified juris-
diction. The specified jurisdiction must be
one for which this Agreement is available
(i.e., IRS has approved the know-your-
customer practices). Such an intermediary
is referred to in this Agreement as a pri-
vate arrangement intermediary (PAI). By
entering into a PAI agreement, QI is not
assigning its liability for the performance
of any of its obligations under this Agree-
ment. Therefore, QI shall remain liable for
any tax, penalties, interest, and any other
sanctions that may result from the failure
of the PAI to meet any of the obligations
imposed by its agreement with QI. QI
agrees not to assert any defenses against
the IRS for the failures of the PAI or any
defenses that the PAI may assert against
QI. For purposes of this Agreement, the
PAI's actual knowledge or reason to know
of facts relevant to withholding or report-
ing shall be imputed to QI. QI's liability
for the failures of the PAI shall apply even
though the PAI is itself a withholding
agent under chapters 3 and 4 and a payor
under chapter 61 and section 3406 and is
itself separately liable for its failure to
meet its obligations under the Code. Not-
withstanding the foregoing, QI shall not
be liable for tax, interest, or penalties for
failure to withhold and report under chap-
ters 3, 4, and 61 and section 3406 unless
the underwithholding or the failure to re-

port amounts correctly on Forms 945,
1042, 1042-S, 1099, or 8966 is due to
QI's or its PAI's failure to properly per-
form its obligations under this Agreement.
The PAI is not required to enter into an
agreement with the IRS but must respond
(either directly or through QI) to IRS in-
quiries related to its compliance described
in section 10.08 of this Agreement. The
IRS may, however, in its sole discretion,
refuse to permit an intermediary to oper-
ate as a PAI by providing notice to QI at
the address provided in section 12.06 of
this Agreement. QI may, however, appeal
the IRS's determination by following the
notice and cure provisions in section
11.06 of this Agreement. For purposes of
this Agreement, an intermediary shall be
considered a PAI only if the following
conditions are met:

(A) The PAI is a certified deemed-
compliant FFI (other than a registered
deemed-compliant Model 1 IGA FFI) that
acts as an intermediary with respect to
reportable amounts and has provided QI
with a certification that it has maintained
such certified deemed-compliant FFI sta-
tus during each certification period;

(B) The PAI does not act as an inter-
mediary for a direct account holder that is
a qualified intermediary, withholding for-
eign trust, withholding foreign partner-
ship, participating FFI, registered
deemed-compliant FFI, or a registered
deemed-compliant Model 1 IGA FFI;

(C) The PAI is, pursuant to a written
agreement between QI and the PAI (PAI
agreement), subject to all the obligations
of QI under this Agreement, except to the
extent modified by sections 4.02 and 4.03
of this Agreement;

(D) For purposes of chapter 4, the PAI
agrees to comply with the FATCA re-
quirements applicable to its chapter 4 sta-
tus as a certified deemed-compliant FFI,
as modified by sections 4.02 and 4.03 of
this Agreement, and is not required to
fulfill QI's FATCA requirements as a par-
ticipating FFI, registered deemed-
compliant FFI, or registered deemed-
compliant Model 1 IGA FFI;

(E) QI identifies the PAI on the
FATCA registration website before the
first payment for which the PAI is oper-
ating under the PAI agreement;

(F) PAI agrees, to the extent necessary
for QI to satisfy its compliance obliga-

tions (e.g., if QI does not receive a waiver
described in section 10.07 of this Agree-
ment), either to provide its documentation
and other information to QI for inclusion
in QI's periodic review described in sec-
tion 10.04 of this Agreement or to conduct
an independent periodic review in accor-
dance with the procedures described in
section 10.05 of this Agreement, and pro-
vide QI with the certification required un-
der section 10.03 of this Agreement for
each certification period in order to allow
the responsible officer of QI to make a
certification to the IRS regarding PAI's
compliance, and agrees to respond (either
directly or through QI) to IRS inquiries
regarding its periodic review described in
section 10.08 of this Agreement, includ-
ing providing the QI and the IRS with the
periodic review report described in sec-
tion 10.06 of this Agreement;

(G) The PAI furnishes QI with a Form
W-8IMY and withholding statement de-
scribed in section 6 of this Agreement as
modified by this section 4.01(G). The PAI
is required to provide QI with Forms W-9
(or, in absence of the form, the name,
address, and U.S. TIN (if available)) of
the PAI's U.S. non-exempt recipient ac-
count holders and the withholding rate
pool information for those account hold-
ers as required by section 6.03(D) of this
Agreement so that the QI (or the payor)
may report on Form 1099 and, if required,
backup withhold. In addition, the PAI is
required to disclose to QI any account
holder of PAI that is a passive NFFE with
one or more substantial U.S. owners (or
one or more controlling persons that is a
specified U.S. person) as defined in
§§ 1.1471-1(b)(74) and 1.1473-1(b), re-
spectively (or in the applicable IGA), and
the account holders or interest holders of
any nonqualified intermediary or flow-
through entity, respectively, which has an
account with the PAI, and provide all of
the documentation and other information
relating to those account holders and in-
terest holders that is required for the QI, or
another withholding agent, to report the
payments made to those account holders
and interest holders to the extent required
by sections 8.02(B) and 8.05 of this
Agreement. Except to the extent the PAI
provides its information to QI for pur-
poses of performing the periodic review,
the PAI is not required to disclose to QI,

or another withholding agent, its direct
account holders that are foreign persons
other than a passive NFFE with one or
more substantial U.S. owners (or one or
more controlling persons that is a speci-
fied U.S. person); and

(H) The PAI agrees to notify QI if the
PAI no longer meets the requirements for
certified deemed-compliant status, and
upon such notification, the agreement be-
tween the PAI and QI will terminate.

### Sec. 4.02. Modification of Obligations for PAI Agreements.

(A) Payments Reportable under Chap-
ters 3 and 4. The agreement between QI
and a PAI must provide that QI shall
report all payments of amounts subject to
chapter 3 or 4 withholding made by the
PAI on QI's Forms 1042 and 1042-S as if
QI had made the payments directly to the
PAI's account holders. Therefore, QI shall
report payments made to each of the fol-
lowing types of a PAI's account holders
as follows:

(1) A direct account holder of the PAI
that is a nonparticipating FFI, QI shall
report an amount subject to chapter 4
withholding using the chapter 4 reporting
pool described in section 8.03 of this
Agreement with the PAI reported as the
recipient with respect to the pool.

(2) A direct foreign account holder of
the PAI for which no withholding is re-
quired under chapter 4 (other than an in-
termediary, custodian, nominee, agent, or
flow-through entity described below), QI
shall report an amount subject to chapter 3
withholding using the chapter 3 reporting
pools as described in section 8.03 of this
Agreement with the PAI reported as the
recipient.

(3) A direct foreign account holder of
the PAI that is a nonqualified intermediary
or flow-through entity, QI shall report
payments of amounts subject to chapter 4
withholding with respect to any indirect
account holders of the PAI that the non-
qualified intermediary or flow-through en-
tity includes in a chapter 4 withholding
rate pool of nonparticipating FFIs using
the chapter 4 reporting pool for such ac-
count holders described in section 8.03 of
this Agreement with the nonqualified in-
termediary or flow-through entity reported
as the recipient and shall report payments
of amounts subject to chapter 3 withhold-

ing made with respect to indirect foreign
account holders of the PAI that are not
subject to chapter 4 withholding by re-
porting the payments as made to specific
recipients under the rules of section 8.02
of this Agreement.

(B) Form 1099 Reporting and
Backup Withholding. The agreement be-
tween QI and a PAI must also provide that
QI shall report all reportable payments
made by the PAI on QI's Forms 945 and
1099 to the extent required under this sec-
tion 4.02(B). QI shall file Forms 1099 and
backup withhold, if required, on report-
able payments made by QI (including by a
PAI) to U.S. non-exempt recipients that
are direct or indirect account holders of a
PAI in accordance with the terms of this
Agreement.

(C) Form 8966 Reporting. The agree-
ment between QI and a PAI must also
provide that QI shall report all withhold-
able payments made by the PAI on Form
8966 to the extent required under this sec-
tion 4.02(C). QI shall file Forms 8966 to
report withholdable payments made by QI
(including by a PAI) to passive NFFEs
with one or more substantial U.S. owners
(or one or more controlling persons that is
a specified U.S. person) that are direct or
indirect account holders of a PAI in ac-
cordance with section 8.05 of this Agree-
ment.

Sec. 4.03. Other Requirements of
PAI Agreement. QI shall require a PAI to
provide QI with all the information nec-
essary for QI to meet its obligations under
this Agreement. No provisions shall be
contained in the agreement between QI
and a PAI that preclude, and no provisions
of this Agreement shall be construed to
preclude, the PAI's joint and several lia-
bility for tax, penalties, and interest under
chapters 3, 4, and 61 and section 3406 to
the extent that underwithholding, penal-
ties, and interest have not been collected
from QI and the underwithholding or fail-
ure to report amounts correctly on Forms
945, 1042, 1042-S, 1099, or Form 8966
are due to a PAI's failure to properly
perform its obligations under its agree-
ment with QI. Nothing in the agreement
between QI and a PAI shall be construed
to limit the PAI's requirements under
chapter 4 or an applicable IGA. Further,
nothing in the agreement between QI and
a PAI shall permit the PAI to assume

primary chapters 3 and 4 withholding re-
sponsibility or assume primary Form 1099
reporting and backup withholding respon-
sibility.

Sec. 4.04. Termination of Arrange-
ment. Except as otherwise provided in
section 4.01(H) of this Agreement, QI
shall cease to treat an intermediary as a
PAI within 90 days from the day QI
knows that the PAI is in default of its
agreement with QI unless the PAI has
cured the event of default prior to the
expiration of such 90-day period. QI must
provide the IRS with notice of any PAI
agreement that has been terminated within
30 days of the termination by removing
the intermediary as a PAI on the FATCA
registration website.

### Sec. 4.05. Joint Account Treatment for Certain Partnerships and Trusts.

(A) In General. If QI is an FFI, QI
may enter an agreement with a nonwith-
holding foreign partnership or nonwith-
holding foreign trust that is either a simple
or grantor trust described in this section
4.05(A) to apply the simplified joint ac-
count documentation, reporting, and with-
holding procedures provided in section
4.05(B) of this Agreement. QI, however,
when acting as a QDD, may not enter into
an agreement under this section 4.05 with
a nonwithholding foreign partnership or
nonwithholding foreign trust account
holder for which it acts as a QDD. QI and
a partnership or trust that apply this sec-
tion 4.05 to any calendar year must apply
these rules to the calendar year in its en-
tirety. QI and the partnership or trust may
not apply this section 4.05 to any calendar
year in which the partnership or trust has
failed to make available to QI or QI's
reviewer the records described in this sec-
tion 4.05(A) within 90 days after these
records are requested, and the partnership
or trust must waive any legal prohibitions
against providing such records to QI. If
the partnership or trust has failed to make
these records available within the 90-day
period, or if QI and the partnership or trust
fail to comply with any other require-
ments of this section 4.05, QI must apply
the provisions of §§ 1.1441-1(c) and
1.1441-5(e) to the partnership or trust as a
nonwithholding foreign partnership or
nonwithholding foreign trust, must correct
its withholding for the period during

which the failure occurred in accordance
with section 9.05 of this Agreement, and
cannot apply this section 4.05 to subse-
quent calendar years. QI and a partnership
or trust that apply this section 4.05 to any
calendar year are not required to apply
this section 4.05 to subsequent calendar
years.

A partnership or trust is described in
this section 4.05(A) of this Agreement if
the following conditions are met:

(1) The partnership or trust has a chap-
ter 4 status as a certified deemed-
compliant FFI (other than a registered
deemed-compliant Model 1 IGA FFI), an
owner-documented FFI with respect to
QI, an exempt beneficial owner, or an
NFFE or is covered as an account that is
excluded from the definition of financial
account under Annex II of an applicable
IGA or under § 1.1471-5(a) and has pro-
vided QI with a certification that it has
maintained such chapter 4 status during
each certification period;

(2) The partnership or trust is a direct
account holder of QI;

(3) None of the partnership's or trust's
partners, beneficiaries, or owners is a
flow-through entity or is acting as inter-
mediary for a payment made by QI to the
partnership or trust;

(4) None of the partnership's or trust's
partners, beneficiaries, or owners is a U.S.
person and none of its foreign partners,
beneficiaries, or owners is subject to with-
holding or reporting under chapter 4
(which would include a nonparticipating
FFI and certain passive NFFEs); and

(5) The partnership or trust agrees to
make available upon request to QI or QI's
reviewer for purposes of QI's periodic
review under section 10 of this Agreement
(including to respond to IRS inquiries re-
garding its compliance review) records
that establish that the partnership or trust
has provided QI with documentation for
purposes of chapters 3 and 4 for all of its
partners, beneficiaries, or owners.

### (B) Modification of Obligations for QI.

(1) QI may rely on a valid Form
W-8IMY provided by the partnership or
trust and may rely on a withholding state-
ment that meets the requirements of
§ 1.1441-5(c)(3)(iv) or (e)(5)(iv), and
§ 1.1471-3(c)(3)(iii)(B), if the payment is
a withholdable payment, and that provides

information for all partners, beneficiaries,
or owners together with valid Forms W-8
or, in the case of a partnership or trust that
is a certified deemed-compliant FFI, doc-
umentary evidence listed in the know-
your-customer (KYC) attachment to this
Agreement from each partner, beneficiary,
or owner, and, for a withholdable pay-
ment, documentation that meets the re-
quirements of § 1.1471-3(d) to establish
the partner's, beneficiary's, or owner's
chapter 4 status. The withholding state-
ment need not provide any allocation in-
formation.

(2) QI must treat payments to the part-
nership or trust as allocated solely to a
partner, beneficiary, or owner that is sub-
ject to the highest rate of withholding un-
der chapter 3 and must withhold at that
rate.

(3) QI may pool report amounts dis-
tributed to, or included in the distributive
share of, the partnership's or trust's direct
partners, beneficiaries, or owners in chap-
ter 3 reporting pools on Form 1042-S as
described in section 8.03(B) of this Agree-
ment.

(4) After QI has withheld in accor-
dance with section 4.05(B)(2) of this
Agreement, it may file a separate Form
1042-S for any partner, beneficiary, or
owner who requests that it do so. If QI
issues a separate Form 1042-S for any
partner, beneficiary, or owner, it cannot
include such partner, beneficiary, or
owner in QI's chapter 3 reporting pool. If
QI has already filed a Form 1042-S and
included the partner, beneficiary, or owner
in a chapter 3 reporting pool, it must file
an amended return to reduce the amount
of the payment reported to reflect the
amount allocated to the recipient on the
recipient's specific Form 1042-S. QI may
file a separate Form 1042-S for a partner,
beneficiary, or owner only if the partner-
ship or trust provides a withholding state-
ment that includes allocation information
for the requesting partner, beneficiary, or
owner and only if the partnership or trust
has agreed in writing under section
4.05(A)(5) of this Agreement to make
available to QI or QI's reviewer the re-
cords that substantiate the allocation in-
formation included in its withholding
statement.

(5) QI may not include any payments
made to a partnership or trust to which QI

is applying the rules of this section 4.05 in
any collective refund claim made under
section 9.04 of this Agreement.

Sec. 4.06. Agency Option for Certain
Partnerships and Trusts. QI may enter
an agreement with a nonwithholding for-
eign partnership or nonwithholding for-
eign trust that is either a simple or grantor
trust described in section 4.06(A) of this
Agreement under which the partnership or
trust agrees to act as an agent of QI with
respect to its partners, beneficiaries, or
owners, and, as QI's agent, to apply the
provisions of the QI Agreement to the
partners, beneficiaries, or owners. QI,
however, when acting as a QDD may not
enter an agreement under this section 4.06
with any account holder for which it acts
as a QDD. By entering into an agreement
with a partnership or trust as described in
this section 4.06, QI is not assigning its
liability for the performance of any of its
obligations under this Agreement. QI and
the partnership or trust to which QI ap-
plies the rules of this section 4.06 are
jointly and severally liable for any tax,
penalties, and interest that may result from
the failure of the partnership or trust to
meet any of the obligations imposed by its
agreement with QI. QI and a partnership
or trust that applies the agency option to
any calendar year must apply these rules
to the calendar year in its entirety. Gener-
ally, QI and a partnership or trust that
applies the agency option to any calendar
year is not required to apply the agency
option to subsequent calendar years. If,
however, QI withholds and reports any
adjustments required by corrected infor-
mation in a subsequent calendar year un-
der section 4.06(B)(2) of this Agreement,
QI must apply the agency option to that
calendar year in its entirety. QI and a
partnership or trust may not apply the
agency option to any calendar year when
the partnership or trust has failed to make
available to QI or QI's reviewer the re-
cords described in section 4.06 of this
Agreement within 90 days after these re-
cords are requested, and the partnership or
trust must waive any legal prohibitions
against providing such records to QI. If,
for any calendar year, the partnership or
trust has failed to make these records
available within the 90-day period, or if
QI and the partnership or trust fail to
comply with any other requirement of this

section 4.06, QI must apply §§ 1.1441-
1(c) and 1.1441-5(e) to the partnership or
trust as a nonwithholding foreign partner-
ship or nonwithholding foreign trust, must
correct its withholding for the period in
which the failure occurred in accordance
with section 9.05 of this Agreement, and
cannot apply the agency option to subse-
quent calendar years.

(A) A partnership or trust is described
in this section 4.06(A) of this Agreement
if the following conditions are met:

(1) The partnership or trust is either a
direct account holder of QI or an indirect
account holder of QI that is a direct part-
ner, beneficiary, or owner of a partnership
or trust to which QI also applies the
agency option.

(2) The partnership or trust has a chap-
ter 4 status as a certified deemed-
compliant FFI (other than a registered
deemed-compliant Model 1 IGA FFI), an
owner-documented FFI, an NFFE, an ex-
empt beneficial owner, or is covered as an
account that is excluded from the defini-
tion of financial account under Annex II
of an applicable IGA or under § 1.1471-
5(a) and has provided QI with a certifica-
tion that it has maintained such chapter 4
status during each certification period;

(3) None of the partnership's or trust's
partners, beneficiaries, or owners is a
withholding foreign trust, withholding
foreign partnership, participating FFI, reg-
istered deemed-compliant FFI, registered
deemed-compliant Model 1 IGA FFI, or
another qualified intermediary acting as
an intermediary for a payment made by QI
to the partnership or trust.

(4) The partnership or trust agrees to
permit QI to treat its direct partners, ben-
eficiaries, or owners as direct account
holders of QI under this Agreement and to
treat its indirect partners, beneficiaries, or
owners as indirect account holders of QI
under this Agreement.

### (B) Modification of Obligations for QI.

(1) QI may rely on a valid Form
W-8IMY provided by the partnership or
trust, together with a withholding state-
ment described in § 1.1441-5(c)(3)(iv) or
(e)(5)(iv) and § 1.1471-3(c)(3)(iii)(B), if
the payment is a withholdable payment,
that includes all information necessary for
QI to fulfill its withholding, reporting, and
filing obligations under this Agreement.

The withholding statement may include
chapter 3 withholding rate pools described
in section 6.03 of this Agreement for part-
ners, beneficiaries, or owners that are not
intermediaries, flow-through entities (or
persons holding interests in the partner-
ship or trust through such entities), U.S.
persons, or passive NFFEs with one or
more substantial U.S. owners (or one or
more controlling persons that is a speci-
fied U.S. person), and the partnership or
trust need not provide to QI documenta-
tion for these partners, beneficiaries, or
owners. The withholding statement may
also include a chapter 4 withholding rate
pool of nonparticipating FFIs described in
section 6.03 of this Agreement for pay-
ments of amounts subject to chapter 4
withholding. Notwithstanding the preced-
ing sentences of this section 4.06(B)(1),
the partnership or trust is required to dis-
close to QI any interest holder that is a
passive NFFE with substantial U.S. own-
ers (or controlling persons that are speci-
fied U.S. persons) or that is a U.S. non-
exempt recipient, as well as the account
holders or interest holders of any non-
qualified intermediary or flow-through en-
tity, respectively, which has an interest in
the partnership or trust, and to provide all
of the documentation and other informa-
tion relating to those account holders and
interest holders that is required for the QI,
or another withholding agent, to report the
payments made to those account holders
and interest holders to the extent required
by sections 8.02(B) and 8.05 of this
Agreement.

(2) Timing of Withholding. QI must
withhold on the date it makes a payment
to the partnership or trust based on a with-
holding statement provided by the part-
nership or trust on which QI is permitted
to rely. The amount allocated to each part-
ner, beneficiary, or owner in the withhold-
ing statement may be based on a reasonable
estimate of the partner's, beneficiary's, or
owner's distributive share of income subject
to withholding for the year. The partnership
or trust must correct the estimated alloca-
tions to reflect the partner's, beneficiary's,
or owner's actual distributive share and
must provide this corrected information to
QI on the earlier of the date that the state-
ment required under section 6031(b) (i.e.,
Schedule K-1) or the Beneficiary Statement
or Owner Statement is mailed or otherwise

provided to the partner, beneficiary, or
owner, or the due date for furnishing the
statement (whether or not the partnership or
trust is required to prepare and furnish the
statement). If that date is after the due date
(without regard to extensions) for QI's
Forms 1042 and 1042-S for the calendar
year, QI may withhold and report any ad-
justments required by the corrected informa-
tion in the following calendar year.

(3) Payments Reportable Under
Chapters 3 and 4. QI shall report on
Form 1042-S all amounts subject to chap-
ters 3 and 4 withholding distributed to, or
included in the distributive share of, the
partnership or trust as follows:

(a) For a direct partner, beneficiary, or
owner of the partnership or trust that is a
nonparticipating FFI, QI shall report an
amount subject to withholding using the
chapter 4 reporting pool described in sec-
tion 8.03(A) of this Agreement with the
partnership or trust reported as a recipient.
(b) For a direct partner, beneficiary, or
owner of the partnership or trust that is a
foreign person for which no withholding
is required under chapter 4 (other than an
intermediary, agent, or flow-through en-
tity described below), QI shall report an
amount subject to chapter 3 withholding
using the chapter 3 reporting pools de-
scribed in section 8.03(B) of this Agree-
ment with the partnership or trust reported
as a recipient.

(c) For a direct or indirect partner, bene-
ficiary, or owner of the partnership or trust
that is a nonqualified intermediary or for-
eign flow-through entity, QI shall report
payments of amounts subject to chapter 4
withholding in a chapter 4 withholding
rate pool of nonparticipating FFIs using
the chapter 4 reporting pool for such part-
ner, beneficiary, or owner with the non-
qualified intermediary or foreign flow-
through entity reported as the recipient,
and QI shall report payments of amounts
subject to chapter 3 withholding for which
no chapter 4 withholding is required by
reporting the payments as made to specific
recipients as described in section 8.02 of
this Agreement.

(4) Form 1099 Reporting and
Backup Withholding. The agreement be-
tween QI and the partnership or trust must
also provide that QI shall include all re-
portable payments made by the partner-
ship or trust in QI's Forms 945 and 1099

to the extent required under this section
4.06(B)(4). QI shall file Forms 1099 and
backup withhold, if required, on report-
able payments made by QI to U.S. non-
exempt recipient that are direct or indirect
partners, beneficiaries, owners of the part-
nership or trust in accordance with the
terms of this Agreement.

(5) Form 8966 Reporting Require-
ments. The agreement between QI and the
partnership or trust must also provide that
QI shall report all withholdable payments
made by the partnership or trust on Form
8966 to the extent required under this sec-
tion 4.06(B)(5). If the partnership or trust
is itself a passive NFFE and if any of its
partners, beneficiaries, or owners is a pas-
sive NFFE with one or more substantial
U.S. owners (or one or more controlling
persons that is a specified U.S. person), QI
shall file Forms 8966 to report all with-
holdable payments made by QI to any
such passive NFFE in accordance with
sections 8.04 and 8.05 of this Agreement.

(C) Other Requirements of Agency
Agreement. QI shall require the partner-
ship or trust to provide QI with all the
information necessary for QI to meet its
obligations under this Agreement. No pro-
visions shall be contained in the agree-
ment between QI and the partnership or
trust that preclude, and no provisions of
this Agreement shall be construed to pre-
clude, the partnership or trust's joint and
several liability for tax, penalties, and in-
terest under chapters 3, 4, and 61 and
section 3406, to the extent that the under-
withholding, penalties, and interest have
not been collected from QI and the under-
withholding or failure to report amounts
correctly on Forms 945, 1042, 1042-S,
1099, or 8966 is due to the partnership's
or trust's failure to properly perform its
obligations under its agreement with QI.
Nothing in the agreement between QI and
the partnership or trust shall be construed
to limit the partnership's or trust's require-
ments under chapter 4 as a certified deemed-
compliant FFI, owner-documented FFI,
NFFE, or exempt beneficial owner. Further,
nothing in the agreement between QI and
the partnership or trust shall permit the part-
nership or trust to assume primary chapters
3 and 4 withholding responsibility or pri-
mary Form 1099 reporting and backup
withholding responsibility.

## SECTION 5. DOCUMENTATION REQUIREMENTS

### Sec. 5.01. Documentation Requirements.

(A) Coordination of Documentation
Requirements with Chapter 4. (1) QI
that is an FFI. If QI is an FFI, QI is
required to perform the due diligence pro-
cedures for each account holder for whom
QI is acting under its FATCA require-
ments as a participating FFI, registered
deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI to
determine if the account is a U.S. account
(or U.S. reportable account) and each ac-
count holder that is a nonparticipating FFI
and, if applicable, recalcitrant account
holder (or non-consenting U.S. account).
See QI's FATCA requirements as a par-
ticipating FFI, registered deemed-
compliant FFI, or registered deemed-
compliant Model 1 IGA FFI to perform
due diligence with respect to each account
that it maintains. If an account holder re-
ceiving the payment is not the payee, QI is
also required to establish the chapter 4
status of the payee or payees to determine
whether withholding applies under chap-
ter 4. See section 5.13(B)(1) of this
Agreement for the requirements for QI to
reliably associate a withholdable payment
with a Form W-8IMY for chapter 4 pur-
poses. To the extent an account holder
receives a payment with respect to which
QI has determined that withholding is not
required under chapter 4, QI shall obtain,
unless already collected, documentation
that meets the requirements of this section
5 to determine whether the account holder
is a foreign person for which QI is re-
quired to withhold under chapter 3 or a
U.S. payee for which QI is required to
backup withhold under section 3406 or
report on Form 1099 under chapter 61.
See, however, section 8.06 of this Agree-
ment providing the circumstances in
which reporting of U.S. accounts (or U.S.
reportable accounts) under its FATCA re-
quirements as a participating FFI, regis-
tered deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI sat-
isfies QI's Form 1099 reporting responsi-
bilities. See Notice 2014-33, 2014-21
I.R.B. 1033, which modifies the time in
which QI is required to implement the
applicable due diligence procedures under

its FATCA requirements as a participating
FFI, registered deemed-compliant FFI, or
registered deemed-compliant Model 1
IGA FFI with respect to an obligation held
by an entity that is opened, issued, or
executed on or after July 1, 2014, and
before January 1, 2015.

(2) QI that is an NFFE. If QI is an
NFFE, QI is required to document the
chapter 4 status of each account holder for
whom QI is acting to determine if with-
holding and reporting apply under section
1471 or 1472 on withholdable payments
made to the account holder. QI is required
to obtain, unless already collected, a valid
Form W-8 or Form W-9 from each ac-
count holder to determine whether QI is
required to withhold under chapter 3 or 4
or report on Form 1099 under chapter 61.
Thus, the allowance in this section 5 for
QI to obtain documentary evidence does
not apply if QI is an NFFE. QI may,
however, obtain appropriate documentary
evidence as additional documentation to
establish the foreign status of an account
holder. See § 1.1471-3(e)(4) for when QI
will have reason to know that an entity's
claim of chapter 4 status is unreliable or
incorrect and § 1.1471-3(c)(6)(ii)(E) for
QI's requirements following a change in
circumstances.

(B) General Documentation Re-
quirements. QI agrees to use its best ef-
forts to obtain documentation from ac-
count holders that receive a reportable
payment to determine whether withhold-
ing applies or whether a payment is re-
portable under this Agreement. If QI is an
FFI obtaining documentary evidence, QI
also agrees to adhere to the know-your-
customer rules that apply to QI with re-
spect to the account holder from whom
the documentary evidence is obtained.
Unless QI can reliably associate a report-
able payment with valid documentation
from the account holder under section
5.13(B) of this Agreement, QI shall apply
the presumption rules described in section
5.13(C) of this Agreement to any account
holder that receives a reportable payment
to determine if withholding is required
under chapter 3 or 4 or if backup with-
holding is required under section 3406. As
set forth in section 11.06 of this Agree-
ment, failure to obtain documentation
from a significant number of direct ac-
count holders constitutes an event of de-

fault. QI agrees to review and maintain
documentation in accordance with this
section 5 and, in the case of documentary
evidence obtained from direct account
holders, in accordance with the know-
your-customer rules set forth in the At-
tachments to this Agreement. QI also
agrees, if the performance of an external
review is requested by IRS as described in
section 10.08(D) of this Agreement, to
make documentation (together with any
associated withholding statements and
other documents or information) available
upon request for inspection by QI's exter-
nal reviewer. QI represents that none of
the laws to which it is subject prohibits
disclosure of the identity of any account
holder or account information to QI's ex-
ternal reviewer. QI may rely on the doc-
umentation it obtains under this section 5
as the basis for the information it provides
to another withholding agent under sec-
tion 6 of this Agreement, as well as to
determine its own withholding, tax, and
reporting obligations.

(C) QI that is a QDD. If QI is acting
as a QDD, QI is required to apply the rules
of this section 5 to each account holder of
an account for which it is acting as a QDD
and to which it makes a reportable pay-
ment or a payment of a qualifying divi-
dend equivalent offsetting payment (not-
withstanding the limitation in section
2.70(B) of this Agreement) in accordance
with the applicable requirements in sec-
tion 5.01(A) and (B) of this Agreement.

Sec. 5.02. Documentation for For-
eign Account Holders. QI may treat an
account holder as a foreign beneficial
owner of an amount if the account holder
provides a valid Form W-8 (other than
Form W-8IMY unless provided by a QI
that is acting as a QDD or assuming pri-
mary withholding responsibility for a sub-
stitute interest payment) or valid docu-
mentary evidence, as described in section
2.20 of this Agreement, that supports the
account holder's status as a foreign per-
son. QI may not treat an account holder
that provides documentation indicating
that it is a bank, broker, intermediary, or
agent (such as an attorney) as a beneficial
owner unless QI receives a statement, in
writing and signed by a person with au-
thority to sign such a statement, stating
that such account holder is the beneficial
owner of the income. Further, QI may not

reduce the rate of withholding with re-
spect to an indirect account holder that is
a foreign beneficial owner unless the cer-
tification provided by the direct account
holder is a valid Form W-8IMY, and then
only to the extent that QI can reliably
associate the payment with valid docu-
mentation that establishes the indirect ac-
count holder's entitlement to a reduced
rate of withholding under chapter 3 and
establishes that withholding does not ap-
ply under chapter 4 in the case of a with-
holdable payment made to the account
holder. See section 5.13(B) of this Agree-
ment for rules regarding reliable associa-
tion with documentation.

Sec. 5.03. Beneficial Owner's Claim
of Treaty Benefits. To the extent an ac-
count holder receives a payment that is
not subject to withholding under chapter
4, QI may not reduce the rate of withhold-
ing under chapter 3 based on a beneficial
owner's claim of treaty benefits unless QI
obtains the documentation required by
section 5.03(A) of this Agreement. In ad-
dition, QI agrees to establish procedures
to inform account holders of the terms of
limitation on benefits provisions of a
treaty (whether or not those provisions are
contained in a separate article entitled
Limitation on Benefits) under which the
account holder is claiming benefits. For
accounts held by an entity opened or doc-
umented on or after January 1, 2017, QI is
required to obtain a Form W-8BEN-E
with the appropriate limitation on benefits
certification or, if QI is allowed to and
obtains documentary evidence, the written
certification accompanying the treaty
statement as described in section 5.03(B)
of this Agreement. For accounts main-
tained by QI prior to January 1, 2017 that
were documented with documentary evi-
dence and for which treaty benefits are
being claimed, QI is required to obtain the
appropriate limitation on benefits state-
ment prior to January 1, 2019.

(A) Treaty Documentation. The doc-
umentation required by this section
5.03(A) is as follows:

(1) The account holder has provided a
properly completed Form W-8BEN or
Form W-8BEN-E on which a claim of
treaty benefits is made, including for an
entity the appropriate limitation on bene-
fits and section 894 certifications, as pro-
vided in § 1.1441-6(b)(1). A U.S. TIN or

foreign TIN shall not be required, how-
ever, if the beneficial owner is a direct
account holder. An indirect account
holder is required to have a either a U.S.
TIN or foreign TIN to claim treaty bene-
fits unless it is claiming treaty benefits on
income from marketable securities;

(2) The account holder has provided
documentary evidence that has been ob-
tained pursuant to the know-your-
customer rules that apply to the account
holder and the account holder, if it is an
entity, has made the treaty statement (if
applicable) required by section 5.03(B) of
this Agreement; or

(3) The account holder provides the
type of documentary evidence required
under § 1.1441-6 to establish entitlement
to a reduced rate of withholding under a
treaty and the account holder, if it is an
entity, has made the treaty statement (if
applicable) required by section 5.03(B) of
this Agreement.

(B) Treaty Statement. The treaty
statement required by an entity account
holder under this section 5.03(B) is as
follows:

[Name of entity account holder] meets
all provisions of the applicable treaty that
are necessary to claim a reduced rate of
withholding, including any limitation on
benefits provisions, and derives the in-
come within the meaning of section 894,
and the regulations thereunder, as the ben-
eficial owner.

The treaty statement must also include
a written certification that the entity meets
the appropriate limitation on benefits cer-
tification as described on Form
W-8BEN-E and its accompanying in-
structions and that specifies the category
of the limitation on benefits provision that
the entity meets. QI is only required to
obtain the treaty statement required by
this section 5.03(B) from an account
holder that is an entity. QI shall not be
required to obtain a treaty statement re-
quired by this section 5.03(B) from an
individual who is a resident of an appli-
cable treaty country or from the govern-
ment, or its political subdivisions, of a
treaty country.

Sec. 5.04. Documentation for Inter-
national Organizations. To the extent an
account holder receives a payment that is
not subject to withholding under chapter
4, QI may not treat the account holder as

an international organization entitled to an
exemption from withholding under sec-
tion 892 unless the name provided on the
documentation (including a Form
W-8EXP) is the name of an entity desig-
nated as an international organization by
executive order pursuant to 22 United
States Code 288 through 288(f) and the
documentation is valid under section 5.10
of this Agreement. If an international or-
ganization is not claiming benefits under
section 892 but under another Code ex-
ception, the provisions of section 5.02 of
this Agreement shall apply rather than the
provisions of this section 5.04.

Sec. 5.05. Documentation for Foreign
Governments and Foreign Central
Banks of Issue.

(A) Documentation From a Foreign
Government or Foreign Central Bank
of Issue Claiming an Exemption From
Withholding Under Section 892 or Sec-
tion 895. To the extent an account holder
receives a payment that is not subject to
withholding under chapter 4, QI may not
treat an account holder as a foreign gov-
ernment or foreign central bank of issue
exempt from withholding under section
892 or 895 unless-

(1) QI receives from the account holder
a Form W-8EXP or documentary evi-
dence establishing that the account holder
is a foreign government or foreign central
bank of issue;

(2) The income paid to the account
holder is the type of income that qualifies
for an exemption from withholding under
section 892 or 895; and

(3) QI does not know, or have reason to
know, that the account holder is a con-
trolled commercial entity as described in
section 892, that the income owned by the
foreign government or foreign central
bank of issue is being received from a
controlled commercial entity, or that the
income is from the disposition of an in-
terest in a controlled commercial entity.

(B) Treaty Exemption. To the extent
an account holder receives a payment that
is not subject to withholding under chap-
ter 4, QI may treat an account holder as a
foreign government or foreign central
bank of issue entitled to a reduced rate of
withholding under an income tax treaty
for purposes of chapter 3 if it has valid
documentation that is sufficient to obtain a

reduced rate of withholding under a treaty
as described in section 5.03 of this Agree-
ment.

(C) Other Code Exception. If a for-
eign government or foreign central bank
of issue is not claiming benefits under
section 892 or under an income tax treaty
but under another Code exception (e.g.,
the portfolio interest exception under sec-
tion 871(h) or 881(c)), the provisions of
section 5.02 of this Agreement apply
rather than the provisions of this section
5.05.

Sec. 5.06. Documentation for For-
eign Tax-Exempt Organizations. To the
extent an account holder receives a pay-
ment that is not subject to withholding
under chapter 4, QI may not treat an ac-
count holder as a foreign tax-exempt or-
ganization and reduce the rate of or ex-
empt the account holder from withholding
for purposes of chapter 3 unless it satisfies
the requirements provided in section
5.06(A), (B), or (C) of this Agreement.

(A) Reduced Rate of Withholding
Under Section 501. QI may not treat an
account holder as a foreign organization
described under section 501(c), and there-
fore exempt from withholding under
chapter 3 (or, if the account holder is a
foreign private foundation, subject to
withholding at a 4-percent rate under sec-
tion 1443(b)) unless QI obtains a valid
Form W-8EXP on which Part IV of the
form is completed.

(B) Reduced Rate of Withholding
Under Treaty. QI may not treat an ac-
count holder as a foreign organization that
is tax-exempt on an item of income pur-
suant to an income tax treaty unless QI
obtains valid documentation as described
under section 5.03 of this Agreement that
is sufficient for obtaining a reduced rate of
withholding under the treaty and the doc-
umentation establishes that the account
holder is an organization exempt from tax
under the treaty on that item of income.

(C) Other Exceptions. If a tax-exempt
entity is not claiming a reduced rate of
withholding because it is a foreign orga-
nization described under section 501(c) or
under a treaty article that applies to ex-
empt certain foreign organizations from
tax, but is claiming a reduced rate of with-
holding under another Code or income tax
treaty exception, the provisions of section
5.02 or 5.03 (as applicable) of this Agree-

ment shall apply rather than the provisions
of this section 5.06.

Sec. 5.07. Documentation from In-
termediaries or Flow-Through Entities.
QI must apply the presumption rules to a
reportable payment made to a nonquali-
fied intermediary or flow-through entity
that is a direct account holder of QI to the
extent QI fails to obtain the documenta-
tion set forth below. If QI receives docu-
mentation for the account holders or in-
terest holders of an intermediary or flow-
through entity, as described in this section
5.07, QI must apply the rules of this sec-
tion 5 to determine the validity of such
documentation.

(A) Withholdable Payments Made to
Nonqualified Intermediaries and Flow-
Through Entities. With respect to a with-
holdable payment made to a nonqualified
intermediary or flow-through entity-

(1) QI receives a valid Form W-8IMY
provided by the nonqualified intermediary
or the flow-through entity receiving the
payment that establishes the chapter 4 sta-
tus of the intermediary or flow-through
entity; and

(2) If the payment is not subject to
withholding under chapter 4 based on
such entity's chapter 4 status (or to the
extent the payment is received on behalf
of exempt beneficial owners), QI can re-
liably associate the payment, within the
meaning of section 5.13(B) of this Agree-
ment, with a withholding statement that
meets the requirements of § 1.1471-
3(c)(iii)(B) that includes the account hold-
ers or interest holders of the intermediary
or flow-through entity in chapter 4 with-
holding rate pools to the extent permitted
or with valid documentation described in
this section 5 provided by account holders
or interest holders of the intermediary or
flow-through entity that are not themselves
nonqualified intermediaries or flow-through
entities and that QI can treat as not subject to
withholding under chapter 4.

(B) Reportable Payments Other than
Withholdable Payments Made to Non-
qualified Intermediaries and Flow-
Through Entities. With respect to a re-
portable payment that is not a withholdable
payment made to a nonqualified intermedi-
ary or flow-through entity (other than a
withholding foreign partnership or with-
holding foreign trust)-

(1) QI receives a valid Form W-8IMY
provided by the nonqualified intermediary
or the flow-through entity regardless of
whether the form includes a chapter 4
status of the nonqualified intermediary or
flow-through entity unless such entity pro-
vides a withholding statement allocating a
payment to a chapter 4 withholding rate
pool of U.S. payees; and

(2) QI can reliably associate the pay-
ment, within the meaning of section
5.13(B) of this Agreement, with a chapter
4 withholding rate pool of U.S. payees or
valid documentation described in this sec-
tion 5 provided by account holders or in-
terest holders of the nonqualified interme-
diary or flow-through entity that are not
themselves nonqualified intermediaries or
flow-through entities.

(C) Reportable Payments Made to
Qualified Intermediaries and With-
holding Foreign Partnerships and
Withholding Foreign Trusts. With re-
spect to a reportable payment made to a
qualified intermediary, a withholding for-
eign partnership, or a withholding foreign
trust, QI receives a valid Form W-8IMY
provided by the qualified intermediary,
withholding foreign partnership, or with-
holding foreign trust that includes the en-
tity's chapter 4 status for a payment that is
a withholdable payment and, for those
payments for which a qualified intermedi-
ary has not assumed primary chapters 3
and 4 withholding responsibility or pri-
mary Form 1099 reporting and backup
withholding responsibility, QI can reli-
ably associate the payment with withhold-
ing rate pools, as described in section 6.03
of this Agreement.

(D) Payments Made to Qualified In-
termediaries Acting as QDDs. For pay-
ments with respect to potential section
871(m) transactions or underlying securi-
ties made to a qualified intermediary act-
ing as a QDD, if QI receives a valid Form
W-8IMY provided by the qualified inter-
mediary acting as a QDD that includes the
qualified intermediary's chapter 4 status
and the required certification that the qual-
ified intermediary is acting as a QDD and
assumes primary withholding responsibil-
ity for such payments, then QI can reliably
associate the payments as made to the
qualified intermediary acting as a QDD.

(E) Private Arrangement Intermedi-
aries. If QI has an agreement with a PAI

(see section 4.01 of this Agreement), QI
obtains from the PAI a Form W-8IMY
completed as if the PAI were a QI that is
an FFI (with the exception that the PAI
must not provide a QI-EIN on the Form
W-8IMY) and QI can reliably associate
the payment with a withholding state-
ment, as described in section 4.01(G) of
this Agreement and the information de-
scribed in this section 5.07 for any ac-
count holders of the PAI that are interme-
diaries or flow-through entities and the
documentation for any passive NFFE with
one or more substantial U.S. owners (or
one or more controlling persons that is a
specified U.S. person if QI is a reporting
Model 1 or reporting Model 2 FFI).

(F) Partnership or Trusts to which
QI Applies the Agency Option. If QI has
an agreement with a partnership or trust
under which the partnership or trust
agrees to act as an agent of QI (see section
4.06 of this Agreement), QI obtains from
the partnership or trust a Form W-8IMY
completed as if the partnership or trust
were a QI (with the exception that the
partnership or trust must not provide a
QI-EIN on the Form W-8IMY) and QI
can reliably associate the payment with a
withholding statement, as described in
section 4.06(B)(1) of this Agreement and
the information described in this section
5.07 for any account holders that are in-
termediaries or flow-through entities and
the documentation for any passive NFFE
with one or more substantial U.S. owners
(or one or more controlling persons that is
a specified U.S. person if QI is a reporting
Model 1 or reporting Model 2 FFI).

Sec. 5.08. Documentation for U.S.
Exempt Recipients. QI shall not treat an
account holder as a U.S. exempt recipient
unless QI obtains from the account holder-

(A) A valid Form W-9 on which the
account holder includes an exempt payee
code to certify that the account holder is a
U.S. exempt recipient for purposes of
chapter 4 reporting;

(B) Documentary evidence that is suf-
ficient to establish that the account holder
is a U.S. exempt recipient; or

(C) Documentary evidence that is suf-
ficient to establish the account holder's
status as a U.S. person and QI can treat the
person as an exempt recipient under the
rules of §§ 1.6045-2(b)(2)(i) or 1.6049-

4(c)(1)(ii), as appropriate, without obtain-
ing documentation.

Sec. 5.09. Documentation for U.S.
Non-Exempt Recipients. QI shall not
treat an account holder as a U.S. non-
exempt recipient unless QI obtains a valid
Form W-9 from the account holder, QI
knows an account holder is a U.S. non-
exempt recipient, or QI must presume a
person is a U.S. non-exempt recipient to
the extent required under section 5.13(C)(3)
or (4) of this Agreement.

## Sec. 5.10. Documentation Validity.

(A) In General. QI may not rely on
documentation if QI has actual knowl-
edge, or reason to know as described in
section 5.10(B) or 5.10(C) of this Agree-
ment, that there is a change in circum-
stances with respect to the information or
statements contained in the documenta-
tion or account information that affects
the reliability of the account holder's
claim. See § 1.1441-1(e)(4)(ii)(D) for the
definition of change in circumstances for
chapter 3 purposes. A change in circum-
stances affecting withholding informa-
tion, including allocation information or
withholding rate pools contained in a
withholding statement, will also cause the
documentation provided with respect to
that information to no longer be reliable.
Once QI knows, or has reason to know, that
documentation provided by an account
holder is unreliable or incorrect to establish
foreign status or residency for purposes of
claiming benefits under an applicable in-
come tax treaty, it can no longer reliably
associate a payment with valid documenta-
tion unless QI obtains the additional docu-
mentation described in this section 5.10.
With respect to a beneficial owner claiming
benefits under an applicable income tax
treaty, QI cannot rely on the account hold-
er's claim of which limitation on benefits
provision it satisfies if QI has actual knowl-
edge that such claim is incorrect. QI will be
considered to have reason to know that a
claim for treaty benefits is unreliable or
incorrect if the documentation provided
by the account holder claims benefits un-
der a treaty that does not exist or is not in
force (i.e., if the country is not included on
the list maintained at https://www.irs.gov/
businesses/international-businesses/united-
states-income-tax-treaties-a-to-z). The rule
in the preceding sentence will apply to

pre-existing accounts for which QI held
valid documentation upon a change in cir-
cumstances or, with respect to a pre-
existing entity account, when it provides a
written limitation on benefits statement
(as described in section 5.03(B) of this
Agreement). For all new accounts, this
rule will apply on account opening. For
purposes of this section 5.10(A), a "pre-
existing account" or "pre-existing entity
account" is an account documented by QI
prior to January 1, 2017, for a QI with a
QI Agreement in effect prior to that date.
For a QI that did not have a QI Agreement
in effect prior to January 1, 2017, a "pre-
existing account" or "pre-existing entity
account" means an account maintained
(and for which QI has valid documenta-
tion) prior to the effective date of its QI
Agreement.

In addition, if QI becomes aware of
information resulting in the documenta-
tion no longer being reliable or correct
and QI has not assumed primary with-
holding responsibility under chapters 3
and 4, QI agrees that it will promptly
provide a withholding agent with cor-
rected information (e.g., corrected with-
holding rate pools, corrected Forms W-9,
or corrected U.S. TINs) within 30 days
after QI knows or has reason to know that
the documentation upon which it has re-
lied is unreliable or incorrect. If QI re-
ceives notification from the IRS that doc-
umentation provided by an account holder
is unreliable or incorrect (e.g., that the
U.S. TIN provided by an account holder is
incorrect), QI shall follow the procedures
set forth in § 31.3406(d)-5. See also QI's
FATCA requirements as a participating
FFI, registered deemed-compliant FFI, or
registered deemed-compliant Model 1
IGA FFI or an NFFE's requirements as a
withholding agent under sections 1471
and 1472 following a change in circum-
stances.

(B) Reason to Know-Direct Account
Holders. If QI is a financial institution as
defined in § 1.1471-5(e), an insurance
company (without regard to whether such
company is a specified insurance com-
pany), or a broker or dealer in securities,
QI shall be considered to have reason to
know that documentation provided by a
direct account holder is unreliable or in-
correct only if one or more of the circum-
stances described in this section 5.10(B)

applies. If an account holder has provided
documentation that is unreliable or incor-
rect under the rules of this section
5.10(B), QI must request new documen-
tation. Notwithstanding the preceding
sentence, QI may rely on the documenta-
tion originally provided if the rules of this
section 5.10(B) permit such reliance and
QI obtains the additional statements and
documentation described in this section
5.10(B). If QI is an NFFE that is required
to collect Forms W-8, see § 1.1441-
7(b)(2) for when QI shall be considered to
have reason to know that a withholding
certificate provided by a direct account
holder is unreliable or incorrect.

### (1) General Rules.

(i) QI shall not rely on a Form W-9 if
it is not permitted to do so under the rules
of § 31.3406(h)-3(e) and shall not rely on
a Form W-8 if it is not permitted to do so
under the rules of § 1.1441-7(b)(4)
through (6) except as otherwise provided
in this section 5.10(B).

(ii) QI shall not treat documentary ev-
idence provided by an account holder as
valid if the documentary evidence does
not reasonably establish the identity of the
person presenting the documentary evi-
dence. For example, documentary evi-
dence is not valid if it is provided in
person by an account holder that is a nat-
ural person and the photograph on the
documentary evidence, if any, does not
match the appearance of the person pre-
senting the document.

(iii) QI may not rely on documentation
to reduce the withholding rate that would
otherwise apply if-

(a) The account holder's documenta-
tion is incomplete or contains information
that is inconsistent with the account hold-
er's claim;

(b) QI has other account information
that is inconsistent with the account hold-
er's claim; or

For example, if an account holder is an
entity and provides documentary evidence
to claim treaty benefits and the documen-
tary evidence establishes the account
holder's status as a foreign person and a
resident of a treaty country but fails to
provide the treaty statement in section

5.03 of this Agreement, the documentary
evidence does not establish the account
holder's entitlement to a reduced rate of
withholding. However, for purposes of es-
tablishing an account holder's status as a
foreign person or residency under an in-
come tax treaty, documentation shall be
considered inconsistent only if it is unre-
liable or incorrect under the rules of sec-
tion 5.10(B)(2) or (3) of this Agreement.

### (2) Rules Regarding Establishment of Foreign Status.

(i) QI shall not treat documentary evi-
dence provided by an account holder be-
fore January 1, 2001, as valid for purposes
of establishing an account holder's status
as a foreign person if QI has actual knowl-
edge that the account holder is a U.S.
person or if it has a current mailing or
current residence address for the account
holder in the United States.

(ii) QI shall not treat documentation
provided by an account holder after De-
cember 31, 2000, as valid for purposes of
establishing the account holder's foreign
status if QI classified the account holder
as a U.S. person in its account informa-
tion, or if it does not have a permanent
residence address for the account holder.
Further, QI shall not treat documentation
provided with respect to an account as
valid for purposes of establishing an ac-
count holder's status as a foreign person if
QI has a current mailing or permanent
residence address (whether or not on the
documentation) for the account holder in
the United States, or if QI has a current
telephone number for the person in the
United States and has no telephone num-
ber for the person outside of the United
States (except with respect to a preexist-
ing obligation (as defined in § 1.1441-
1(c)(54)) to the extent the QI documented
the foreign status of the account holder for
purposes of chapter 3 or 61 before July 1,
2014). The limit on reason to know de-
scribed in the preceding sentence with re-
spect to a preexisting account documented
before July 1, 2014, shall not apply, how-
ever, if QI is notified of a change in cir-
cumstances and as of the date of such
notification QI shall not treat such docu-
mentation as valid for purposes of estab-
lishing the account holder's foreign status.

If QI has classified the account holder
as a U.S. person or has an address or sole
telephone number for the account holder

in the United States, QI may nevertheless
treat an account holder that is an individ-
ual as a foreign person if QI-

(a) Has in its possession, or obtains,
additional documentary evidence (which
does not contain a U.S. address) support-
ing the claim of foreign status and a rea-
sonable explanation in writing supporting
the account holder's foreign status (as de-
fined in § 1.1441-7(b)(12));

(b) Obtains a valid Form W-8, and the
Form W-8 contains a permanent resi-
dence address outside the United States
and a mailing address, if any, outside the
United States (or if a mailing address is
inside the United States, the account
holder provides a reasonable explanation
in writing supporting the account holder's
foreign status); or

(c) Has classified the account holder as
a resident of the country in which the
account is maintained; QI is required to
report a payment made to the account
holder annually on a tax information state-
ment that is filed with the tax authority of
the country in which the office that main-
tains the account is located as part of the
country's resident reporting requirements;
and that country has a tax information
exchange agreement or an income tax
treaty in effect with the United States.

If QI has classified the account holder
as a U.S. person or has an address or sole
telephone number for the account holder
in the United States, QI may nevertheless
treat an account holder that is an entity
(other than a flow-through entity) as a
foreign person if QI-

(d) Has in its possession, or obtains,
documentary evidence that substantiates
that the entity is actually organized or
created under the laws of a foreign country;

(e) Obtains a valid Form W-8, and the
Form W-8 contains a permanent resi-
dence outside the United States and a
mailing address, if any, outside the United
States (or if a mailing address is inside the
United States, the account holder provides
additional documentary evidence suffi-
cient to establish the account holder's for-
eign status); or

(f) Has classified the entity as a resi-
dent of the country where the account is
maintained; QI is required to report a pay-
ment made to the account holder annually
on a tax information statement filed with
the tax authority of the country in which

the office that maintains the account is
located as part of the country's resident
reporting requirements; and that country
has a tax information exchange agreement
or an income tax treaty in effect with the
United States.

(iii) With respect to an account other
than a preexisting obligation (defined in
§ 1.1441-1(c)(54)) that QI has docu-
mented the foreign status of the account
holder for purposes of chapter 3 or 61
before July 1, 2014, QI shall not treat
documentation as valid for purposes of
establishing an account holder's status as
a foreign person if it has, either on the
documentary evidence or in its current
customer account files, an unambiguous
indication of place of birth for the indi-
vidual in the United States. The limit on
reason to know described in the preceding
sentence with respect to a preexisting ob-
ligation documented before July 1, 2014,
shall not apply, however, if QI either re-
views documentation that contains a U.S.
place of birth or is notified of a change in
circumstances, and, as of the date of such
review or notification, QI shall not treat
such documentation as valid for purposes
of establishing the account holder's for-
eign status.

QI may nevertheless treat the account
holder with a U.S. place of birth as a
foreign person if QI-

(a) Has in its possession, or obtains,
documentary evidence evidencing citizen-
ship in a country other than the United
States and obtains a copy of the individ-
ual's Certificate of Loss of Nationality of
the United States; or

(b) Obtains a valid Form W-8BEN
that establishes the account holder's for-
eign status, documentary evidence evi-
dencing citizenship in a country other than
the United States, and a reasonable written
explanation of the account holder's renun-
ciation of U.S. citizenship or the reason
the account holder did not obtain U.S.
citizenship at birth.

(iv) QI shall not treat documentation as
valid for purposes of establishing an ac-
count holder's status as a foreign person if
the account holder has standing instruc-
tions directing QI to pay amounts from its
account to an address or an account main-
tained in the United States. QI may treat
documentation as valid for establishing
foreign status even though the account

holder has such standing instructions if
the account holder provides a reasonable
explanation in writing supporting the ac-
count holder's foreign status (as defined in
§ 1.1441-7(b)(12)) or has both a valid
Form W-8 establishing foreign status and
documentary evidence establishing for-
eign status.

### (3) Rules for Establishing Residency Under an Income Tax Treaty.

(i) QI shall not treat an account holder
as a resident under an income tax treaty if
the permanent residence address on a
Form W-8 is not in the applicable treaty
country or if the account holder notifies
QI of a new permanent residence address
that is not in the treaty country. QI may,
however, rely on the Form W-8 if the
account holder provides a reasonable ex-
planation for the permanent residence ad-
dress outside the treaty country or if QI
has in its possession, or obtains, documen-
tary evidence that establishes the claim of
residency in a treaty country.

(ii) QI shall not treat an account holder
as a resident under an income tax treaty if
the permanent residence address on a
Form W-8 is in the applicable treaty
country but the Form W-8 contains a
mailing address outside the treaty country
or QI has a current mailing address for the
account holder outside the applicable
treaty country in its account information.
A mailing address that is a P.O. Box,
in-care-of address, or address at a finan-
cial institution (if the financial institution
is not a beneficial owner) shall not pre-
clude QI from treating the account holder
as a resident of an applicable treaty coun-
try if such address is in the applicable
treaty country. If QI has a current mailing
address for the account holder outside the
applicable treaty country (whether or not
contained on the Form W-8), QI may nev-
ertheless treat the account holder as a resi-
dent of the applicable treaty country if QI-

(a) Has in its possession, or obtains,
additional documentary evidence support-
ing the account holder's claim of residence
in the applicable treaty country (and the
additional documentation does not contain
an address outside the treaty country);

(b) Has in its possession, or obtains,
documentary evidence that establishes
that the account holder is an entity orga-
nized in a treaty country (or an entity

managed and controlled in a treaty coun-
try, if the applicable treaty so requires);

(c) Knows that the address outside the
applicable treaty country (other than a
P.O. Box, or in-care-of address) for an
entity that is a resident of the applicable
treaty country is the address of a branch of
such entity; or

(d) Obtains a written statement from
the account holder that reasonably estab-
lishes entitlement to treaty benefits.

(iii) QI shall not treat documentary ev-
idence as valid for purposes of establish-
ing residency in a treaty country if QI has
a current mailing or current permanent
residence address for the account holder
(whether or not on the documentary evi-
dence) that is outside of the applicable
treaty country, or QI has no permanent
residence address for the account holder.
If QI has a current mailing or current
permanent residence address for the ac-
count holder outside of the applicable
treaty country, QI may nevertheless rely
on the documentary evidence if QI-

(a) Has in its possession, or obtains,
additional documentary evidence support-
ing the account holder's claim of resi-
dence in the applicable treaty country (and
the documentary evidence does not con-
tain an address outside the applicable
treaty country, a P.O. Box, an in-care-of
address, or an address of a financial insti-
tution);

(b) Has in its possession, or obtains,
documentary evidence that establishes
that the account holder is an entity orga-
nized in a treaty country (or an entity
managed and controlled in a treaty coun-
try, if the applicable treaty so requires); or

(c) Obtains a valid Form W-8 that
contains a permanent residence address
and a mailing address in the applicable
treaty country.

(iv) QI shall not treat documentation as
valid for purposes of establishing an ac-
count holder's residence in an applicable
treaty country if the account holder has
standing instructions for QI to pay
amounts from its account to an address or
an account outside the treaty country un-
less the account holder provides a reason-
able explanation in writing establishing
the direct account holder's residence in
the applicable treaty country or a valid
Form W-8 that contains a permanent res-
idence address and a mailing address in

the applicable treaty country, or, if the
account holder initially provided a Form
W-8, documentary evidence establishing
the account holder's residence in the ap-
plicable treaty country.

(C) Reason to Know-Indirect Ac-
count Holders. QI shall be considered to
have reason to know that relevant infor-
mation or statements contained in docu-
mentation provided by an indirect account
holder is unreliable or incorrect if a rea-
sonably prudent person in the position of a
qualified intermediary would question the
claims made. QI shall have reason to
know that documentation provided by a
nonqualified intermediary or a flow-
through entity is unreliable or incorrect if
the nonqualified intermediary or flow-
through entity does not provide QI with,
to the extent required, the names of the
indirect account holders, their addresses,
allocation information allocating pay-
ments to each indirect account holder, and
sufficient information for QI to report
payments on Forms 1042-S and 1099. In
addition, QI shall have reason to believe
that an indirect account holder is not en-
titled to a reduced rate of withholding
under an income tax treaty if the nonquali-
fied intermediary or flow-through entity
has not provided sufficient information so
that QI can verify that the indirect account
holder has provided a U.S. TIN or foreign
TIN, if required, and made the necessary
statements regarding limitations on bene-
fits provisions and deriving the income
under section 894 and the regulations
thereunder. See § 1.1441-7(b)(10) and
section 5.03 of this Agreement.

Sec. 5.11. Documentation Validity
Period.

(A) Documentation Other than
Form W-9. QI may rely on valid docu-
mentary evidence obtained from account
holders in accordance with applicable
know-your-customer rules as long as the
documentary evidence remains valid un-
der those rules or until QI knows, or has
reason to know, that the information con-
tained in the documentary evidence is in-
correct. QI may rely on the representa-
tions described in section 5.03 of this
Agreement obtained in connection with
such documentation for the same period
of time as the documentation. For estab-
lishing an account holder's chapter 3 sta-

tus (as defined in § 1.1441-1(c)(45)) or
foreign status for chapter 61 purposes, QI
may rely on a Form W-8 until its validity
expires under § 1.1441-1(e)(4)(ii) and
may rely on documentary evidence (other
than documentary evidence obtained pur-
suant to applicable know-your-customer
rules) until its validity expires under
§ 1.6049-5(c).

(B) Form W-9. QI may rely on a valid
Form W-9 as long as it has not been
informed by the IRS or another withhold-
ing agent that the form is unreliable or
incorrect. If QI has primary Form 1099
reporting and backup withholding respon-
sibility, it may rely on a Form W-9 unless
one of the conditions of § 31.3406(h)-
3(e)(2)(i) through (v) apply.

Sec. 5.12. Maintenance and Retention
of Documentation.

(A) Maintaining Documentation. QI
shall maintain documentation by retaining
the original documentation, a certified
copy, a photocopy, a scanned copy, a mi-
crofiche, or other means that allow repro-
duction (provided that the QI has recorded
receipt of the documentation and is able to
produce a hard copy). For a direct ac-
count, if QI is not required to retain copies
of documentary evidence under its know-
your-customer rules, QI may instead re-
tain a notation of the type of documenta-
tion reviewed, the date the documentation
was reviewed, the document's identifica-
tion number (if any) (e.g., a passport num-
ber), and whether such documentation
contained any U.S. indicia. For direct ac-
counts opened prior to January 1, 2001, if
QI was not required under its know-your-
customer rules to maintain originals or
copies of documentation, QI may rely on
its account information if it has complied
with all other aspects of its know-your-
customer rules regarding establishment of
an account holder's identity, it has a re-
cord that the documentation required un-
der the know-your-customer rules was ac-
tually examined by an employee of QI in
accordance with the know-your-customer
rules, and it has no information in its
possession that would require QI to treat
the documentation as invalid under the
rules of section 5.10(B) of this Agree-
ment.

(B) Retention Period. QI shall retain a
record of the account holder's documen-

tation obtained under this section 5 for as
long as the documentation is relevant to
the determination of QI's tax liability or
reporting responsibilities under sections
871, 881, 1461, 1474(a), and 3406.

Sec. 5.13. Application of Presumption
Rules.

(A) In General. QI shall apply the
presumption rules of section 5.13(C) of
this Agreement if QI cannot reliably asso-
ciate a payment with valid documentation
from an account holder. The presumption
rules cannot be used to grant a reduced
rate of withholding. For example, the
portfolio interest exception of sections
871(h) and 881(c) shall not apply to a
person that is presumed to be foreign.
Further, QI must apply the presumption
rules when required and may not rely on
its actual knowledge regarding an account
holder's chapter 4 status or status as a
U.S. or foreign person to apply a reduced
rate of withholding. Notwithstanding the
preceding sentence, QI must rely on its
actual knowledge regarding an account
holder rather than what is presumed under
section 5.13(C) of this Agreement if,
based on such knowledge, it should with-
hold an amount greater than the withhold-
ing rate under the presumption rules or it
should report on Form 1042-S or Form
1099 an amount that would otherwise not
be reported. Failure to follow the pre-
sumption rules may result in liability for
underwithholding, penalties, and interest.

(B) Reliably Associating a Payment
with Documentation. A payment can be
reliably associated with documentation if
it is considered reliably associated with
documentation under the rules of
§ 1.1441-1(b)(2)(vii) and, for a withhold-
able payment, § 1.1471-3(c). Generally,
QI can reliably associate a payment with
documentation if, for that payment, it
holds valid documentation, as described in
this section 5, from the account holder; it
can reliably determine how much of the
payment relates to the valid documenta-
tion provided by such account holder; and
it has no actual knowledge or reason to
know, under the requirements of section
5.10 of this Agreement, that any of the
information, certifications, or statements
in or associated with the documentation
are incorrect. Sections 5.13(B)(1) through
(5) of this Agreement describe when a

payment is reliably associated with docu-
mentation if the payment is made to an
account holder that is an intermediary or
flow-through entity (other than a nonpar-
ticipating FFI that is not acting on behalf
of exempt beneficial owners).

(1) Reliably Associating a Payment
with Documentation Provided by a
Nonqualified Intermediary or Flow-
Through Entity. Generally, QI can reli-
ably associate a payment with documen-
tation provided by a nonqualified
intermediary or flow-through entity if it
can reliably associate the payment with a
valid Form W-8IMY provided by the
nonqualified intermediary or flow-through
entity, and it can determine the portion of
the payment that relates to valid documen-
tation associated with the Form W-8IMY
for an account holder or interest holder of
the nonqualified intermediary or flow-
through entity that is not itself a nonquali-
fied intermediary or flow-through entity;
and the nonqualified intermediary or flow-
through entity provides sufficient infor-
mation for QI to report the payments on
Form 1042-S, Form 1099, or Form 8966
if reporting is required.

If the payment is a withholdable pay-
ment, the Form W-8IMY must provide
the nonqualified intermediary's or flow-
through entity's chapter 4 status to the
extent required for chapter 4 purposes. In
lieu of the nonqualified intermediary or
flow-through entity providing documenta-
tion for an account holder that is subject to
chapter 4 withholding, QI can reliably as-
sociate a withholdable payment with valid
documentation associated with the Form
W-8IMY from the nonqualified interme-
diary or flow-through entity if it can de-
termine the portion of the payment allo-
cable to a chapter 4 withholding rate pool
(to the extent permissible under § 1.1471-
3(c)(3)(iii)(B)).

If the payment is a reportable amount,
QI can reliably associate such payment
with valid documentation provided by a
nonqualified intermediary or a flow-
through entity that is a participating FFI or
registered deemed-compliant FFI if, in
lieu of providing documentation for its
account holders that are U.S. persons,
such nonqualified intermediary or flow-
through entity allocates the payment to a
chapter 4 withholding rate pool of U.S.
payees and also certifies on a valid Form

W-8IMY that it meets the requirements
of § 1.6049-4(c)(4)(iii) with respect to
any account holder of an account it main-
tains within the meaning of § 1.1471-
5(d)(5) (i.e., a direct account holder) that
receives a payment included in this pool
or allocates a payment that is a withhold-
able payment to a chapter 4 withholding
rate pool of recalcitrant account holders.

Notwithstanding the preceding sen-
tences in this section 5.13(B)(1), to the
extent a payment is not subject to report-
ing on Form 1042-S, Form 1099, or Form
8966, QI can reliably associate the pay-
ment with valid documentation if it can
determine the portion of the payment that
is allocable to a group of documented
account holders (other than nonqualified
intermediaries or flow-through entities)
for whom withholding and reporting is not
required. For example, QI can treat a pay-
ment of short term OID allocable to a
group of documented foreign account
holders as reliably associated with valid
documentation. Further, if the documen-
tation attached to a nonqualified interme-
diary's or flow-through entity's Form
W-8IMY is documentation from another
nonqualified intermediary or flow-through
entity, then QI must apply the rules of this
paragraph to that other nonqualified inter-
mediary or flow-through entity.

(2) Reliably Associating a Payment
with a Withholding Certificate Pro-
vided by Another Qualified Intermedi-
ary that Does Not Assume Primary
Chapters 3 and 4 Withholding or Pri-
mary Form 1099 Reporting and
Backup Withholding Responsibility.
Generally, QI can reliably associate a pay-
ment with documentation provided by an-
other qualified intermediary that does not
assume either primary chapters 3 and 4
withholding responsibility or primary
Form 1099 reporting and backup with-
holding responsibility if it can reliably
associate the payment with a valid Form
W-8IMY and, if the form is associated
with a withholdable payment, it includes
the qualified intermediary's chapter 4 sta-
tus to the extent required for chapter 4
purposes. Additionally, the Form
W-8IMY must be associated with a with-
holding statement that allocates the with-
holdable payment among the chapter 4
withholding rate pools (to the extent per-
missible under § 1.1471-3(c)(3)(iii)(B)),

and with respect to a payment of an
amount subject to chapter 3 withholding
that is either not a withholdable payment
or a withholdable payment for which no
chapter 4 withholding is required, that al-
locates such payment among chapter 3
withholding rate pools for foreign account
holders as described in section 6.03(C) of
this Agreement.

If the payment is a reportable amount,
QI can reliably associate the payment with
documentation provided by another qual-
ified intermediary if the withholding state-
ment allocates the payment to withholding
rate pools attributable to U.S. non-exempt
recipients and the documentation includes
a valid Form W-9 for each U.S. non-
exempt recipient account holder for which
the other qualified intermediary is re-
quired to report on Form 1099 and, if
required, backup withhold. QI can also
reliably associate a reportable amount
with valid documentation provided by an-
other qualified intermediary that is a par-
ticipating FFI or registered deemed-
compliant FFI if, in lieu of providing
documentation for each U.S. non-exempt
recipient account holder, the qualified in-
termediary allocates the payment to a
chapter 4 withholding rate pool of U.S.
payees and provides the applicable certi-
fication(s) on a valid Form W-8IMY for
allocating the payment to this pool or al-
locates a payment that is a withholdable
payment to a chapter 4 withholding rate
pool of recalcitrant account holders. Not-
withstanding the preceding sentences in
this section 5.13(B)(2), the presumption
rules shall not apply if a payment cannot
be allocated to each U.S. non-exempt re-
cipient account holder or to a chapter 4
withholding rate pool of U.S. payees to
the extent the alternative procedures of
section 6.03(D) of this Agreement apply.

(3) Reliably Associating a Payment
with Documentation Provided by a
Qualified Intermediary that Assumes
Primary Chapters 3 and 4 Withholding
Responsibility and Does Not Assume
Primary Form 1099 Reporting and
Backup Withholding Responsibility.
Generally, QI can reliably associate a pay-
ment with valid documentation provided
by another qualified intermediary that as-
sumes primary chapters 3 and 4 withhold-
ing responsibility, but not primary Form
1099 reporting and backup withholding

responsibility, if it can associate the pay-
ment with a valid Form W-8IMY from
the qualified intermediary and, if the form
is associated with a withholdable pay-
ment, it includes the qualified intermedi-
ary's chapter 4 status to the extent required
for chapter 4 purposes. Additionally, the
Form W-8IMY must be associated with a
withholding statement that allocates a pay-
ment that is a withholdable payment or an
amount subject to chapter 3 withholding that
is not a withholdable payment among a sin-
gle withholding rate pool for all account
holders with respect to which the qualified
intermediary assumes primary chapters 3
and 4 withholding responsibility.

If the payment is a reportable amount,
QI can reliably associate the payment with
documentation provided by another qual-
ified intermediary if the withholding state-
ment allocates the payment to withholding
rate pools attributable to each U.S. non-
exempt recipient, as described in section
6.03(D), and the documentation includes a
valid Form W-9 for each U.S. non-
exempt recipient account holder for which
the other qualified intermediary is re-
quired to report on Form 1099 and, if
required, backup withhold. QI can also
reliably associate such payment with valid
documentation provided by another qual-
ified intermediary that is a participating
FFI or registered deemed-compliant FFI
if, in lieu of providing documentation for
each U.S. non-exempt recipient account
holder, the qualified intermediary allo-
cates the payment made to the U.S. non-
exempt recipient to a chapter 4 withhold-
ing rate pool of U.S. payees and provides
the applicable certifications on a valid
Form W-8IMY for allocating the pay-
ment to this pool or allocates a payment
that is a withholdable payment to a chap-
ter 4 withholding rate pool of recalcitrant
account holders. Notwithstanding the pre-
ceding sentences in this section 5.13(B)(3),
the presumption rules shall not apply if a
payment cannot be allocated to each U.S.
non-exempt recipient account holder or to a
chapter 4 withholding rate pool of U.S. pay-
ees to the extent the alternative procedures
of section 6.03(D) of this Agreement apply.

(4) Reliably Associating a Payment
With Documentation Provided by a
Qualified Intermediary that Assumes
Primary Form 1099 Reporting and
Backup Withholding Responsibility.

Generally, QI can reliably associate a pay-
ment with valid documentation provided
by another qualified intermediary that as-
sumes primary Form 1099 reporting and
backup withholding responsibility, but not
primary chapters 3 and 4 withholding re-
sponsibility, to the extent it can associate
the payment with a valid Form W-8IMY
from the qualified intermediary that, if the
payment is a withholdable payment, in-
cludes the qualified intermediary's chap-
ter 4 status to the extent required for chap-
ter 4 purposes. Additionally, the Form
W-8IMY must be associated with a with-
holding statement that allocates a payment
that is a withholdable payment among
chapter 4 withholding rate pools (other
than a pool of U.S. payees and to the
extent permissible under § 1.1471-
3(c)(3)(iii)(B)) and, with respect to a pay-
ment that is an amount subject to chapter
3 withholding but is either not a withhold-
able payment or a withholdable payment
for which no chapter 4 withholding is
required, allocates the payment among
chapter 3 withholding rate pools for for-
eign account holders as described in sec-
tion 6.03(C) of this Agreement, and iden-
tifies the portion of the payment for which
QI assumes primary Form 1099 reporting
and backup withholding responsibility.

(5) Reliably Associating a Payment
with Documentation Provided by a
Qualified Intermediary that Assumes
Both Primary Chapters 3 and 4 With-
holding Responsibility and Primary
Form 1099 Reporting and Backup
Withholding Responsibility. Generally,
QI can reliably associate a payment with
valid documentation provided by another
qualified intermediary that assumes both
primary chapters 3 and 4 withholding re-
sponsibility and primary Form 1099 re-
porting and backup withholding responsi-
bility if QI can associate the payment with
a valid Form W-8IMY from the qualified
intermediary that, if the payment is a with-
holdable payment, includes the qualified
intermediary's chapter 4 status. Addition-
ally, the Form W-8IMY must also desig-
nate the accounts for which the other qual-
ified intermediary is acting as a qualified
intermediary and is assuming primary
chapters 3 and 4 withholding and primary
Form 1099 reporting and backup with-
holding responsibility. If the other quali-
fied intermediary is acting as a QDD, the

Form W-8IMY (or withholding state-
ment) must also designate those accounts
for which the QDD is receiving payments
with respect to potential section 871(m)
transactions or underlying securities as a
QDD. If the qualified intermediary receiv-
ing a payment assumes both primary
chapters 3 and 4 withholding responsibil-
ity and primary Form 1099 reporting and
backup withholding responsibility for
substitute interest payments as described
in section 3.03(A), the Form W-8IMY
must indicate that the qualified intermedi-
ary is assuming primary withholding re-
sponsibility for all such payments.

(C) Presumption Rules. With respect
to a withholdable payment made to a for-
eign entity, if QI is an NFFE, it must
follow the presumption rules of § 1.1471-
3(f) when it cannot reliably associate a
withholdable payment with valid docu-
mentation. If QI is an FFI, it must follow
its FATCA requirements as a participating
FFI, registered deemed-compliant FFI, or
registered deemed-compliant Model 1
IGA FFI to determine the chapter 4 status
of an account holder when it cannot reli-
ably associate a withholdable payment
with valid documentation.

With respect to a payment that is an
amount subject to chapter 3 withholding
that is either not a withholdable payment
or a withholdable payment for which no
chapter 4 withholding is required, the pre-
sumption rules are the rules under
§ 1.1441-1(b)(3) that a withholding agent
must follow to determine the status of a
beneficial owner (i.e., as a U.S. person or
foreign person and as an individual or
entity (and the entity's classification))
when it cannot reliably associate a pay-
ment with valid documentation. With re-
spect to a reportable payment (including a
withholdable payment made to an entity)
that is not an amount subject to chapter 3
withholding, the presumption rules are the
rules of § 1.6049-5(d) that a payor must
follow to determine the status of a payee
(e.g., as a non-exempt recipient) when it
cannot reliably associate a payment with
valid documentation. The presumption
rules are as follows:

(1) Certain Withholdable Payments
Made with Respect to an Offshore Ob-
ligation. A withholdable payment paid
outside of the United States as defined
under § 1.6049-5(e) with respect to an

offshore obligation (as defined in
§ 1.1471-1(b)(88)) that is made to an en-
tity is presumed made to a nonparticipat-
ing FFI for purposes of chapter 4. A with-
holdable payment that is not an amount
subject to chapter 3 withholding, that is
paid outside the U.S. with respect to an
offshore obligation, and that is treated as
made to a payee that is an individual is
presumed made to a U.S. person when the
payee has any of the indicia of U.S. status
that are described in section 5.10(B)(2) of
this Agreement. If QI is a participating
FFI or registered deemed-compliant FFI
(other than a reporting Model 1 FFI), see
the rules under its FATCA requirements
as a participating FFI or registered
deemed-compliant FFI for classifying ac-
count holders as recalcitrant account hold-
ers. If QI is an FFI, see also section 8.06
of this Agreement for whether QI is re-
quired to report such payments on Form
1099.

(2) Amounts Subject to Withholding
under Chapter 3 that are Paid with
Respect to an Offshore Obligation. An
amount that is subject to chapter 3 with-
holding that is not a withholdable pay-
ment is presumed made to an undocu-
mented foreign account holder if the
payment is made outside of the United
States with respect to an offshore obliga-
tion. If QI is an NFFE or an FFI that is not
required to withhold on recalcitrant ac-
count holders pursuant to the terms of an
applicable Model 1 or Model 2 IGA, an
amount subject to chapter 3 withholding
that is a withholdable payment and that is
treated as made to a payee that is an
individual is also presumed made to an
undocumented foreign account holder if
the payment is made outside of the United
States with respect to an offshore obliga-
tion. QI must treat an amount described in
this section 5.13(C)(2) as subject to with-
holding under chapter 3 at a rate of 30
percent on the gross amount of the pay-
ment and must report the payment as
made to an unknown recipient on Form
1042-S.

(3) Payments on Certain Short-Term
Obligations and Bank Deposit Interest.
An amount of U.S. source original issue
discount on the redemption of a short-
term obligation or U.S. source bank de-

posit interest not subject to chapter 4 with-
holding is presumed made to an
undocumented U.S. non-exempt recipient
account holder regardless of whether paid
to an individual or entity. QI must report
an amount described in this section
5.13(C)(3) on Form 1099. QI must backup
withhold at 28 percent3 and report such
amounts on Form 1099 unless it provides
sufficient information to another payor
from which it receives such amounts to
backup withhold and report the payments
and QI does not know that the other payor
has failed to backup withhold or report.

(4) Foreign Source Income, Broker
Proceeds, and Certain Other Amounts
Made with Respect to an Offshore Ob-
ligation. A payment of an amount that is
not a withholdable payment and is not an
amount subject to chapter 3 withholding
(other than payments of short-term OID
and bank deposit interest described in sec-
tion 5.13(C) of this Agreement) that is
paid outside the United States with respect
to an offshore obligation and that is made
to a payee that is an individual is pre-
sumed made to a U.S. non-exempt recip-
ient when the payee has any of the indicia
of U.S. status that are described in section
5.10(B) of this Agreement. If the payment
is made to a payee that is an entity, QI
must apply the principles of § 1.1441-
1(b)(3)(ii), § 1.1441-5(d)(2), or § 1.1441-
5(e)(6) (as applicable) without regard to
§ 1.1441-1(b)(3)(ii)(D) for purposes of
this paragraph 5.13(C)(4). For a payment
of gross proceeds for which QI is a broker
under § 1.6045-1, similar rules apply to a
payment made with respect to a sale that
is effected at an office outside the United
States under § 1.6045-1(g)(1)(ii). QI must
report an amount described in this section
5.13(C)(3) as paid to a presumed U.S.
non-exempt recipient on Form 1099 to the
extent required under section 8.06 of this
Agreement. Backup withholding shall not
be required, however, if the exception
provided in § 31.3406(g)-1(e) applies.

(5) Other Payments. For any payment
not covered in sections 5.13(C)(1), (2),
(3), or (4) of this Agreement, see the pre-
sumption rules provided in § 1.1441-1(b)(3)
or § 1.6049-5(d)(2) (as applicable).

## SECTION 6. QUALIFIED INTERMEDIARY WITHHOLDING CERTIFICATE AND DISCLOSURE OF ACCOUNT HOLDERS TO WITHHOLDING AGENT

Sec. 6.01. Qualified Intermediary
Withholding Certificate. QI agrees to fur-
nish a qualified intermediary withholding
certificate to each withholding agent from
which it receives a reportable amount as a
qualified intermediary. The qualified in-
termediary withholding certificate is a
Form W-8IMY (or acceptable substitute
form) that certifies that QI is acting as a
qualified intermediary, contains QI's QI-
EIN, and provides all other information
required by the form. If QI is acting as a
QDD for payments with respect to poten-
tial section 871(m) transactions or under-
lying securities, it must certify that it is
acting as a QDD and assumes primary
chapters 3 and 4 withholding responsibil-
ity and primary Form 1099 reporting and
backup withholding responsibility for
payments with respect to potential section
871(m) transactions that it makes as a
principal, and it must provide all other
information required by Form W-8IMY
with respect to the certification, including
its QI-EIN. If QI is acting with respect to
payments of substitute interest as de-
scribed in section 3.03(A) of this Agree-
ment, it must certify that it is assuming
primary chapters 3 and 4 withholding re-
sponsibility and primary Form 1099 re-
porting and backup withholding responsi-
bility for all such payments, in addition to
the other certifications it makes and infor-
mation it provides as a qualified interme-
diary. If QI receives a withholdable pay-
ment, QI must certify to its chapter 4
status, provide its GIIN (if applicable),
and provide the other information and cer-
tifications required on the form. QI must
also certify its chapter 4 status as a par-
ticipating FFI or registered deemed-
compliant FFI when QI provides a Form
W-8IMY that certifies that it meets the
requirements of § 1.6049-4(c)(4)(iii)
with respect to any account holder of an
account it maintains that is included in a
chapter 4 withholding rate pool of U.S.
payees on QI's withholding statement.

3See section 3406(a) providing that the current applicable rate of backup withholding is the fourth lowest rate of tax applicable under section 1(c).

Except as otherwise provided in sec-
tion 6.02 of this Agreement, QI also
agrees to furnish each withholding agent
to whom it provides a Form W-8IMY
with the withholding statement described
in section 6.02 of this Agreement. QI is
not required to disclose, as part of its
Form W-8IMY or its withholding state-
ment, any information regarding the iden-
tity of a direct or indirect account holder
that is a foreign person, or a U.S. exempt
recipient or a holder of a U.S. account. To
the extent QI does not assume primary
Form 1099 reporting and backup with-
holding responsibility under section 3.04
of this Agreement or is not excepted from
reporting under section 8.06 of this Agree-
ment, for each U.S. non-exempt recipient
account holder on whose behalf QI re-
ceives a reportable amount, QI must pro-
vide to a withholding agent the Form
W-9, or if any such account holder has
not provided a Form W-9, the name, ad-
dress, and U.S. TIN (if available).

### Sec. 6.02. Withholding Statement.

(A) In General. QI agrees to provide
to each withholding agent from which QI
receives reportable amounts as a qualified
intermediary a written statement (with-
holding statement) described in this sec-
tion 6.02. A withholding statement shall
not be provided to a withholding agent if
QI assumes both primary chapters 3 and 4
withholding responsibility and primary
Form 1099 reporting and backup with-
holding responsibility for all of its ac-
counts. For example, if QI is only acting
as a QDD, it does not have to provide a
withholding statement . QI may act as a
QDD only with respect to payments made
and received as a principal with respect to
potential section 871(m) transactions and
underlying securities. The withholding
statement forms an integral part of the
Form W-8IMY. The withholding state-
ment may be provided in any manner, and
in any form, to which QI and the with-
holding agent mutually agree. For exam-
ple, QI and the withholding agent may
agree to establish a procedure to furnish
withholding statement information elec-
tronically provided that the procedure
meets the requirements of § 1.1441-
1(e)(3)(iv). In addition, QI and the with-
holding agent must be capable of provid-
ing upon request a hard copy of all

withholding statements provided by QI.
The withholding statement shall be up-
dated as often as necessary for the with-
holding agent to meet its reporting and
withholding obligations under chapters 3,
4, and 61 and section 3406.

(B) Content of Withholding State-
ment. The withholding statement must
contain sufficient information for a with-
holding agent to apply the correct rate of
withholding on payments allocable to the
accounts identified on the statement and to
properly report such payments on Forms
1042-S and Forms 1099, as applicable.
The withholding statement must-

(1) Designate those accounts for which QI
acts as a qualified intermediary;

(2) Designate those accounts for which QI
assumes primary chapters 3 and 4 with-
holding responsibility or primary Form
1099 reporting and backup withholding
responsibility (including accounts for
which QI is acting with respect to pay-
ments of U.S. source substitute interest (as
described in section 3.03(A) of this
Agreement));

(3) If applicable, designate the accounts
for which QI is acting as a QDD; and

(4) Provide information regarding with-
holding rate pools, as described in section
6.03 of this Agreement.

### Sec. 6.03. Chapters 3 and 4 Withholding Rate Pools.

(A) In General. QI shall provide as
part of its withholding statement with-
holding rate pool information in a manner
sufficient for the withholding agent to
meet its chapters 3 and 4 and backup
withholding responsibilities and its Form
1042-S and Form 1099 reporting respon-
sibilities.

(B) Chapter 4 Withholding Rate
Pools. If QI receives a withholdable pay-
ment on behalf of its account holders, QI
may allocate the payment to a chapter 4
withholding rate pool. A chapter 4 with-
holding rate pool is a payment of a single
type of income (e.g., interest or dividends)
that is allocated to payees that are nonpar-
ticipating FFIs. If QI is a participating FFI
or registered deemed-compliant FFI
(other than reporting Model 1 FFI), it may
also allocate a witholdable payment to a
chapter 4 withholding rate pool of recal-
citrant account holders (if applicable). If
QI is a participating FFI or registered

deemed-compliant FFI receiving a report-
able amount that is excepted from report-
ing under section 8.06(A) of this Agree-
ment (excluding sections 8.06(A)(2) and
(A)(3) of this Agreement when the pay-
ment is subject to chapter 4 withholding
and section 8.06(A)(4) of this Agree-
ment), QI may allocate the payment to a
chapter 4 withholding rate pool of U.S.
payees. See section 6.03(D) of this Agree-
ment for the alternative procedures that
may be used in this case. Except as oth-
erwise provided in this section 6.03(B), if
QI receives a withholdable payment, QI
must provide the information required un-
der § 1.1471-3(c)(3)(iii)(B)(2).

Further, if QI elects under its FATCA
requirements as a participating FFI or reg-
istered deemed-compliant FFI to backup
withhold instead of withholding under
chapter 4 with respect to certain recalci-
trant account holders, QI's withholding
statement must indicate the portion of
such payment subject to backup withhold-
ing under section 3406 that is allocated to
such account holders and must provide all
other information relating to such account
holders that is required under chapter 61
for the withholding agent to report with
respect to the payment.

If QI has an account holder that is
another intermediary (whether a qualified
intermediary, a nonqualified intermediary,
or a private arrangement intermediary) or
a flow-through entity, QI may combine
the account holder information provided
by the intermediary or flow-through entity
with QI's direct account holder informa-
tion to determine the amounts allocable to
each of QI's chapter 4 withholding rate
pools described in this section 6.03(B). If
QI is an NFFE that has an account holder
that is another intermediary or flow-
through entity that is a participating FFI or
registered deemed-compliant FFI, QI may
provide the account holder's chapter 4
withholding rate pools of recalcitrant ac-
count holders and U.S. payees to the ex-
tent applicable.

(C) Chapter 3 Withholding Rate
Pools. With respect to any portion of the
payment that is attributable to payees for
which no chapter 4 withholding is re-
quired but is an amount subject to chapter
3 withholding, a chapter 3 withholding
rate pool is a payment of a single type of
income that is subject to a single rate of

withholding (e.g., 0%, 10%, 15%, or
30%) and that is reported under a single
chapter 4 exemption code on Form
1042-S. QI shall determine chapter 3
withholding rate pools based on valid doc-
umentation obtained under section 5 of
this Agreement or, if a payment cannot be
reliably associated with valid documenta-
tion, on the presumption rules of section
5.13(C) of this Agreement. If QI has an
account holder that is another intermedi-
ary (whether a qualified intermediary, a
nonqualified intermediary, or a private ar-
rangement intermediary) or a flow-
through entity (other than a nonparticipat-
ing FFI that is not acting on behalf of any
exempt beneficial owners), QI may com-
bine the account holder information pro-
vided by the intermediary or flow-through
entity with QI's direct account holder in-
formation to determine the amounts allo-
cable to each of QI's chapter 3 withhold-
ing rate pools with respect to the portion
of the payment allocable to an account
holder to which chapter 4 withholding
does not apply.

(D) U.S. Non-Exempt Recipients
Subject to Backup Withholding or
Form 1099 Reporting and Alternative
Procedures for Allocating Payments on
Withholding Statements. To the extent
QI does not assume primary Form 1099
reporting and backup withholding respon-
sibility and is not excepted from reporting
on Form 1099 under section 8.04 of this
Agreement, QI's withholding statement
must establish a separate withholding rate
pool for each U.S. non-exempt recipient
account holder that QI is required to re-
port on Form 1099 and has disclosed to
the withholding agent. QI may, by mutual
agreement with the withholding agent, es-
tablish a single withholding rate pool (not
subject to backup withholding) for all
U.S. non-exempt recipient account hold-
ers for whom QI is required to report on
Form 1099 and has provided Forms W-9
prior to the withholding agent paying any
reportable amounts or, if applicable, des-
ignated broker proceeds to which backup
withholding does not apply. QI must es-
tablish a separate withholding rate pool
for all U.S. non-exempt recipient account
holders subject to backup withholding
prior to the withholding agent paying any
reportable amounts or, if applicable, des-
ignated broker proceeds.

Alternatively, QI may include U.S.
non-exempt recipients in a zero rate with-
holding pool that includes U.S. exempt
recipients and foreign persons for which
no withholding is required under chapters
3 and 4 and section 3406 and may include
payments allocated to a chapter 4 with-
holding rate pool of U.S. payees in this
pool to the extent permitted to be provided
by QI under section 6.03(B) of this Agree-
ment. If QI chooses the alternative proce-
dure of this paragraph, QI must provide
sufficient information to the withholding
agent no later than January 15 of the year
following the year in which the reportable
amounts and designated broker proceeds,
if applicable, are paid in order to allocate
to each U.S. non-exempt recipient account
holder or to a chapter 4 withholding rate
pool of U.S. payees (when applicable).
Failure to provide such information will
result in the application of penalties to QI
under sections 6721 and 6722 and shall
constitute an event of default under sec-
tion 11.06 of this Agreement.

## SECTION 7. TAX RETURN OBLIGATIONS

### Sec. 7.01. Form 1042 Filing Requirement.

(A) In general. QI shall file a return on
Form 1042, whether or not QI withheld
any amounts under chapter 3 or 4, on or
before March 15 of the year following any
calendar year in which QI acts as a qual-
ified intermediary and makes a payment
of an amount subject to chapter 3 or 4
withholding when acting as a qualified
intermediary under this Agreement. A
separate Form 1042 must be filed by each
legal entity that is a qualified intermediary
covered by this Agreement. Form 1042
shall be filed at the address indicated on
the form, at the address at which the IRS
notifies QI to file the return under the
provisions of section 12.06 of this Agree-
ment, or in accordance with the instruc-
tions to file Form 1042 electronically. In
addition to the information specifically re-
quested on Form 1042 and the accompany-
ing instructions, if QI made any overwith-
holding or underwithholding adjustments
under §§ 1.1461-2 and 1.1474-2 and sec-
tions 9.02 and 9.05 of this Agreement, QI
must attach a statement setting forth the
amounts of any overwithholding or under-

withholding adjustments and an explanation
of the circumstances that resulted in the
over- or underwithholding.

(B) Extensions for Filing Returns. QI
may request an extension of the time for
filing Form 1042, or any of the informa-
tion required to be attached to the form, by
submitting Form 7004, Application for
Automatic Extension of Time to File Cer-
tain Business Income Tax, Information,
and Other Returns, on or before the due
date of the return.

(C) QDD Tax Liability Require-
ments for QDDs. In addition to its re-
quirements under section 7.01(A) of this
Agreement, a QI that is acting as a QDD
(other than a foreign branch of a U.S.
financial institution) also must report on
Form 1042 its QDD tax liability, includ-
ing separately identifying each part of the
QDD tax liability described in section
3.09(A) through (C) of this Agreement.
For its section 871(m) amount, a QDD is
also required to separately report the
amount of dividends on underlying secu-
rities associated with potential section
871(m) amounts and dividend equivalent
payments it received in its dealer capacity
and the amount of dividend equivalent
payments and qualifying dividend equiv-
alent offsetting payments that it makes or
is contractually obligated to make in its
dealer capacity. A QDD must also report
any other information required by Form
1042 with respect to its QDD tax liability
(including any part thereof).

A QDD must also maintain, and make
available to the IRS upon request, a rec-
onciliation schedule that tracks across cal-
endar years the section 871(m) amount for
each dividend with respect to each under-
lying security associated with potential
section 871(m) transactions or underlying
security referenced by a potential section
871(m) transaction. The reconciliation
schedule must separately state total
amounts received as a QDD, as well as the
dividends, dividend equivalents, and qual-
ifying dividend equivalent offsetting pay-
ments for each dividend with respect to
each underlying security associated with
potential section 871(m) transactions,
each dividend that is not with respect to an
underlying security associated with poten-
tial section 871(m) transactions, or each
dividend with respect to each underlying
security referenced by a potential section

871(m) transaction received as a QDD or
payments that the QDD makes or is con-
tractually obligated to make, and any ad-
justments thereto, separated by payments
made as a dealer and as a non-dealer. The
reconciliation schedule may be main-
tained in any manner or format that per-
mits the IRS to reconcile the amount re-
ported by the QDD for the calendar year.

Sec. 7.02. Form 945 Filing Require-
ment. QI shall file a return on Form 945
on or before January 31 following the
calendar year in which QI backup with-
held an amount under section 3406. Sep-
arate Forms 945 must be filed by each
legal entity that is a qualified intermediary
covered by this Agreement. The form
must be filed at the address specified in
the instructions for Form 945, at the ad-
dress at which the IRS notifies QI to file
the return under the provisions of section
12.06 of this Agreement, or in accordance
with the instructions to file Form 945 elec-
tronically.

Sec. 7.03. Retention of Returns. QI
shall retain Forms 945 and 1042 (includ-
ing, with respect to QI acting as a QDD,
its reconciliation schedule) for the appli-
cable statute of limitations on assessment
under section 6501.

## SECTION 8. INFORMATION REPORTING OBLIGATIONS

Sec. 8.01. Form 1042-S Reporting.
Except as otherwise provided in section
8.02 of this Agreement, QI is not required
to file Forms 1042-S for amounts paid to
each separate account holder for whom
such reporting would otherwise be re-
quired. Instead, QI shall file a Form
1042-S reporting the pools of income (re-
porting pools) as determined in section
8.03 of this Agreement. QI must file its
Forms 1042-S in the manner required by
the regulations under chapters 3 and 4 (or
in the case of a participating FFI, in the
manner required under the FFI Agree-
ment) and the instructions to the form,
including any requirement to file the
forms magnetically or electronically. Sep-
arate Forms 1042-S must be filed by each
legal entity that is a qualified intermediary
covered by this Agreement. Each QI cov-
ered by this Agreement may, however,
allow its individual branches to file Forms
1042-S provided that all Forms 1042-S
contain the QI-EIN of the legal entity of

which the branch forms a part and (to the
extent required for chapter 4 purposes) the
GIIN of the branch. Any Form 1042-S
required by this section 8 shall be filed on
or before March 15 following the calendar
year in which the payment reported on the
form was made. QI may request an exten-
sion of time to file Forms 1042-S by
submitting Form 8809, Application for
Extension of Time to File Information Re-
turns, by the due date of Forms 1042-S in
the manner required by (and extent per-
mitted on) Form 8809.

Sec. 8.02. Recipient Specific Report-
ing. QI (whether or not it assumes primary
chapters 3 and 4 withholding responsibil-
ity) is required to file separate Forms
1042-S for amounts paid to each separate
account holder as described in this section
8.02. QI must file separate Forms 1042-S
by income code, exemption code, recipi-
ent code, chapter 3 or 4 withholding rate
pool, and withholding rate.

(A) QI must file a separate Form
1042-S for each account holder that is a
qualified intermediary, to the extent such
payment is required to be reported under
§ 1.1461-1, withholding foreign partner-
ship, or withholding foreign trust that re-
ceives from QI an amount subject to with-
holding under chapter 3 or 4, regardless of
whether such account holder is a direct or
indirect account holder of QI.

(B) QI must file a separate Form
1042-S for each account holder that is a
nonqualified intermediary or flow-through
entity that is a participating FFI, registered
deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI and
that receives an amount subject to chapter
4 withholding from QI that is allocable to
each of such FFI's chapter 4 withholding
rate pools of recalcitrant account holders,
nonparticipating FFIs, and pool of U.S.
payees, if applicable, regardless of
whether such FFI is a direct or indirect
account holder of QI.

(C) QI must file a separate Form
1042-S for each account holder that is a
nonqualified intermediary or flow-through
entity that is not described in section
8.02(B) of this Agreement (other than a
nonparticipating FFI) that receives from
QI an amount subject to chapter 4 with-
holding allocable to such entity's chapter
4 withholding rate pool of payees that are
nonparticipating FFIs, regardless of

whether such intermediary or flow-
through entity is a direct or indirect ac-
count holder of QI.

(D) QI must file a separate Form
1042-S for each account holder of QI that
is a PAI or a partnership or trust to which
QI applies the agency option that receives
from QI an amount subject to chapter 4
withholding allocable to such entity's
chapter 4 withholding rate pool of payees
that are nonparticipating FFIs or an
amount subject to chapter 3 withholding
that is either not a withholdable payment
or a withholdable payment for which no
chapter 4 withholding is required and that
is allocable to such entity's chapter 3
withholding rate pools.

(E) QI must file a separate Form
1042-S for each account holder of QI that
is a partnership or trust to which QI ap-
plies the joint account option that receives
from QI an amount subject to chapter 3
withholding and is allocable to such enti-
ty's chapter 3 withholding rate pools.

(F) QI must file a separate Form
1042-S for each unknown recipient with
respect to an account holder that is a non-
qualified intermediary, flow-through en-
tity, or qualified intermediary that does
not assume primary chapters 3 and 4 with-
holding responsibility and that receives an
amount subject to chapter 4 withholding
from QI that QI must presume is allocable
to such entity's chapter 4 withholding rate
pool of payees that are nonparticipating
FFIs under the presumption rule of
§ 1.1471-3(f)(5).

(G) QI must file a separate Form
1042-S for each foreign account holder
(or interest holder) of a nonqualified in-
termediary or flow-through entity that is a
nonparticipating FFI that is receiving a
payment on behalf of an exempt beneficial
owner (regardless of whether the non-
qualified intermediary or flow-through en-
tity is a direct or indirect account holder of
QI) to the extent QI can reliably associate
such amounts with valid documentation
from such nonqualified intermediary or
flow-through entity as to the payment al-
locable to one or more exempt beneficial
owners. In addition, QI must file separate
Forms 1042-S in the same manner for
each foreign account holder (or interest
holder) of a nonqualified intermediary or
flow-through entity that is described in the
preceding sentence and that is a direct or

indirect account holder (or interest holder)
of a PAI of QI or a partnership or trust to
which QI applies the agency option.

(H) QI must file separate Forms
1042-S for each foreign account holder
(or interest holder) of a nonqualified in-
termediary or flow-through entity that is
receiving an amount subject to chapter 3
withholding that is either not a withhold-
able payment or a withholdable payment
for which no chapter 4 withholding is
required to the extent QI can reliably as-
sociate such amounts with valid documen-
tation from an account holder that is not
itself a nonqualified intermediary or flow-
through entity. In addition, QI must file
separate Forms 1042-S in the same man-
ner for each foreign account holder (or
interest holder) of a nonqualified interme-
diary or flow-through entity that is de-
scribed in the preceding sentence and that
is a direct or indirect account holder (or
interest holder) of a PAI of QI or a part-
nership or trust to which QI applies the
agency option.

(I) QI must file a separate Form
1042-S for each direct account holder that
establishes its status as a passive NFFE
but fails to provide the information re-
garding its owners as required under
§ 1.1471-3(d)(12)(iii) unless such infor-
mation was reported by the withholding
agent.

(J) If QI is acting as a QDD, QI must
file a separate Form 1042-S for any
amount subject to chapter 3 withholding
with respect to a potential section 871(m)
transaction made to another QDD.

### Sec. 8.03. Reporting Pools for Form 1042-S Reporting.

(A) Chapter 4 Reporting Pools. Except
for amounts required to be reported under
section 8.02 of this Agreement, if QI is an
FFI, QI shall report all amounts subject to
chapter 4 withholding by reporting pools
on a Form 1042-S if those amounts are
paid to direct account holders of QI. A
separate Form 1042-S shall be filed for
each type of reporting pool. A chapter 4
reporting pool is a payment of a single
type of income (e.g., interest, dividends),
determined in accordance with the catego-
ries of income reported on Form 1042-S,
that is allocable to a chapter 4 withholding
rate pool consisting of either recalcitrant
account holders or payees that are nonpar-

ticipating FFIs. QI must report recalcitrant
account holders in pools based upon a
recalcitrant account holder's particular
status described in § 1.1471-4(d)(6), with
a separate Form 1042-S issued for each
such pool.

If QI is an FFI, it may report in a
chapter 4 withholding rate pool of U.S.
payees an account holder that is (or is
presumed) a U.S. person and that QI re-
ports as a U.S. account under its applica-
ble FATCA requirements as a participat-
ing FFI or registered deemed-compliant
FFI provided that QI is excepted from
Form 1099 reporting with respect to the
payment under section 8.06(A)(1) of this
Agreement or section 8.06(A)(2) and
(A)(3) of this Agreement if the payment is
both excepted from Form 1099 reporting
and not subject to withholding under
chapter 4.

If QI is an NFFE, QI shall report all
amounts subject to chapter 4 withholding
by reporting pools on a Form 1042-S if
those amounts are paid to direct account
holders that are nonparticipating FFIs in a
chapter 4 reporting pool of nonparticipat-
ing FFIs.

(B) Chapter 3 Reporting Pools. Ex-
cept for amounts required to be reported
under section 8.02 of this Agreement, QI
shall report an amount subject to chapter 3
withholding that is either not a withhold-
able payment or a withholdable payment
for which no chapter 4 withholding is
required and that is paid to a foreign ac-
count holder by reporting pools on a Form
1042-S if those amounts are paid to direct
account holders of QI or to direct account
holders of a PAI of QI or a partnership or
trust described in section 4 of this Agree-
ment. A separate Form 1042-S shall be
filed for each type of reporting pool. A
chapter 3 reporting pool is a payment of a
single type of income that falls within a
particular withholding rate, chapter 3 ex-
emption code, and, if the payment is a
withholdable payment, chapter 4 exemp-
tion code as determined on Form 1042-S.
QI may use a single chapter 3 pool report-
ing code (e.g., QI- withholding rate pool-
general) for all reporting pools except for
amounts paid to foreign tax-exempt recip-
ients, for which a separate chapter 3 pool
reporting code (e.g., QI- withholding rate
pool- exempt organization) must be used.
For this purpose, a foreign tax-exempt

recipient includes any organization that is
not subject to chapter 3 withholding and is
not liable to tax in its jurisdiction of res-
idence because it is a charitable organiza-
tion, a pension fund, or a foreign govern-
ment.

(C) Qualifying Dividend Equivalent
Offsetting Payment Reporting Pools. In
addition to the reporting required under
sections 8.02 and 8.03 of this Agreement
for dividend equivalents that are amounts
subject to chapter 3 or 4 withholding, a QI
acting as a QDD shall report on separate
Forms 1042-S (as required by the form
and its accompanying instructions) the
amount of the qualifying dividend equiv-
alent offsetting payments that represent
(a) payments made to U.S. persons that
would be dividend equivalent payments if
made to foreign persons and (b) the effec-
tively connected income (described in
section 2.70(A)(2) of this Agreement).
For purposes of determining when a qual-
ifying dividend equivalent offsetting pay-
ment is made, apply the timing rule in
§ 1.1441-2(e)(4) (substituting “qualifying
dividend equivalent offsetting payment"
for "dividends" and "dividend payment
date" for "payment date" in the first sen-
tence).

A QI acting as a QDD must also pro-
vide, upon request by the IRS, the name,
address, and TIN of any U.S. non-exempt
recipient to whom the QI acting as a QDD
makes a qualifying dividend equivalent
offsetting payment described in section
2.70(A)(1) and shall require such person
to waive any prohibition on disclosure of
such information to the IRS. If a QI acting
as a QDD does not obtain a waiver or
collect and maintain such information for
any U.S. non-exempt recipient described
in the preceding sentence, any payment
made to such person is not a qualifying
dividend equivalent offsetting payment. A
QI acting as a QDD shall report those
payments made to U.S. non-exempt recip-
ients that are not qualifying dividend
equivalent offsetting payments in a pool
on a separate Form 1042-S (as required
by the form and its accompanying instruc-
tions).

## Sec. 8.04. FATCA U.S. Account Reporting.

(A) QI that is an FFI. If QI is an FFI,
QI is required to report each U.S. account

(or, in the case of an FFI that is a reporting
Model 1 FFI or a registered deemed-
compliant Model 1 IGA FFI, each U.S.
reportable account) that it maintains and
for whom QI is acting consistent with its
FATCA requirements as a participating
FFI, registered deemed-compliant FFI, or
registered deemed-compliant Model 1
IGA FFI. See QI's FATCA requirements
as a participating FFI, registered deemed-
compliant FFI, or registered deemed-
compliant Model 1 IGA FFI to report each
account that is a U.S. account (or U.S.
reportable account) that it maintains. If QI
is a participating FFI or registered
deemed-compliant FFI (other than a re-
porting Model 1 FFI or registered
deemed-compliant Model 1 IGA FFI), QI
must report its U.S. accounts on Form
8966, FATCA Report, in the time and
manner required under its FATCA re-
quirements as a participating FFI or reg-
istered deemed-compliant FFI except to
the extent QI is reporting under § 1.1471-
4(d)(5) on Form 1099 with respect to its
U.S. accounts. If QI is a reporting Model
1 FFI or registered deemed-compliant
Model 1 IGA FFI, QI must report each
U.S. reportable account on Form 8966 as
required under the applicable Model 1
IGA. QI cannot delegate to its withhold-
ing agent its requirements to report U.S.
accounts (or U.S. reportable accounts) un-
der its applicable FATCA requirements as
a participating FFI, registered deemed-
compliant FFI, or registered deemed-
compliant Model 1 IGA FFI (regardless of
whether QI does or does not assume pri-
mary Form 1099 reporting and backup
withholding responsibility under section 3
of this Agreement). See section 8.06 of
this Agreement for when the reporting
described in this section 8.04 satisfies QI's
Form 1099 reporting responsibilities with
respect to reportable payments under
chapter 61.

(B) QI that is an NFFE. If QI is an
NFFE acting as a qualified intermediary
on behalf of its shareholders, QI shall file
Forms 8966 to report information about
any substantial U.S. owners of QI. QI
must report on Form 8966 to the extent
required of a direct reporting NFFE in the
time and manner provided in the instruc-
tions to the form. Such report must in-
clude the name, address, and U.S. TIN of
each substantial U.S. owner of QI; the

total of all payments made to each sub-
stantial U.S. owner (including gross
amounts paid or credited to the substantial
U.S. owner with respect to such owner's
equity interest in the QI during the calen-
dar year, which includes payments in re-
demption or liquidation (in whole or in
part) of the substantial U.S. owner's eq-
uity interest in QI); and any other infor-
mation as required by the form and its
accompanying instructions.

If QI is an NFFE acting as a qualified
intermediary on behalf of persons other
than its shareholders, QI shall file Form
8966 to report withholdable payments
made to an account holder that is an NFFE
(other than an excepted NFFE) with one
or more substantial U.S. owners if the
NFFE is the beneficial owner of the with-
holdable payment received by QI. See
§ 1.1471-1(b)(8) for the definition of ben-
eficial owner. QI must report on Form
8966 in accordance with the form and its
accompanying instructions. Such report
must include the name of the NFFE that is
owned by a substantial U.S. owner; the
name, address, and U.S. TIN of each sub-
stantial U.S. owner; the total of all with-
holdable payments made to the NFFE dur-
ing the calendar year; and any other
information as required by the form and
its accompanying instructions. If QI is
acting as a sponsoring entity on behalf of
an NFFE for chapter 4 purposes, QI is not
required to report as described in this
paragraph if QI reports the NFFE as part
of QI's requirements as a sponsoring en-
tity. See section 1.1472-1(c)(5)(ii) for the
reporting requirements of a sponsoring
entity.

Sec. 8.05. Form 8966 Reporting for
Payees that are NFFEs. QI shall file
Form 8966 to report withholdable pay-
ments made to an intermediary or flow-
through entity that provides information
regarding an account holder (or interest
holder) that is an NFFE other than an
excepted NFFE with one or more substan-
tial U.S. owners (or one or more control-
ling persons that is a specified U.S. person
under an applicable IGA). QI must report
on Form 8966 in the time and manner
provided in § 1.1474-1(i)(2). Such report
must include the name of the NFFE that is
owned by a substantial U.S. owner (or
controlling person); the name, address,
and U.S. TIN of each substantial U.S.

owner; the total of all withholdable pay-
ments made to the NFFE during the cal-
endar year (or reportable period under the
applicable IGA); and any other informa-
tion as required by the form and its ac-
companying instructions. QI is not re-
quired to report, however, if such
information is reported pursuant to section
8.04 of this Agreement or if the interme-
diary or flow-through entity certifies on its
withholding statement that it is reporting
the account holder (or interest holder) as a
U.S. account pursuant to its FATCA re-
quirements as a participating FFI, regis-
tered deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI.

Sec. 8.06. Form 1099 Reporting Re-
sponsibility. QI shall file Forms 1099
and, unless filing magnetically, Form
1096, Annual Summary and Transmittal
of U.S. Information Returns, for report-
able payments made to persons described
in this section 8.06. Forms 1099 shall be
filed on or before the date prescribed for
the particular Form 1099 under chapter 61
and in the manner required by regulations
under chapter 61 and the instructions to
the forms (including the requirements for
filing the forms magnetically or electron-
ically). Extensions of the time to file
Forms 1099 may be requested by submit-
ting Form 8809 in the manner required by
the form. If QI is required to file Forms
1099, it must file the appropriate form for
the type of income paid (e.g., Form 1099-
DIV for dividends, Form 1099-INT for
interest, Form 1099-B for broker pro-
ceeds). QI must file Forms 1099 to report
a reportable payment other than in the
situations listed in sections 8.06(A) and
(B) of this Agreement.

(A) Reportable Amount. QI must file
a Form 1099 in accordance with the in-
structions to the form for the aggregate
amount of a particular type of reportable
amount paid to an account holder that is
(or is presumed) a U.S. non-exempt recip-
ient (whether a direct or indirect account
holder). However, QI is not required to
file a Form 1099 on a reportable amount
if-

(1) QI is a non-U.S. payor reporting the
account holder of a U.S. account under its
FATCA requirements as a participating
FFI or registered deemed-compliant FFI
(including a reporting Model 1 FFI) and

the other conditions of § 1.6049-
4(c)(4)(i) are satisfied;

(2) QI reports the account holder's ac-
count as held by a recalcitrant account
holder or, in the case of a QI that is a
reporting Model 2 FFI or nonreporting
Model 2 FFI treated as registered deemed-
compliant, as a non-consenting account
under its FATCA requirements as a par-
ticipating FFI or registered deemed-
compliant FFI and the other conditions of
§ 1.6049-4(c)(4)(ii) are satisfied;

(3) QI is a non-U.S. payor that is a
reporting Model 1 FFI or registered
deemed-compliant Model 1 IGA FFI and
determines that the account has U.S. indi-
cia for which appropriate documentation
sufficient to treat the account as held by a
specified U.S. person has not been pro-
vided and reports the account as a U.S.
reportable account and the other condi-
tions of § 1.6049-4(c)(4)(ii) are satisfied;

(4) QI has not assumed primary Form
1099 reporting and backup withholding
responsibility with respect to the account
holder's account and has provided a Form
W-9 to a withholding agent or has pro-
vided withholding rate pool information
with respect to such account holder to a
withholding agent to apply backup with-
holding and QI does not know that the
withholding agent has failed to report or
backup withhold as required;

(5) With respect to an account holder
of an intermediary or flow-through entity
(other than a qualified intermediary) that
is a direct or indirect account holder of QI,
the intermediary or flow-through entity
allocates the payment to a chapter 4 with-
holding rate pool of U.S. payees and pro-
vides a Form W-8IMY containing a cer-
tification that the entity meets the
requirements of § 1.6049-4(c)(4)(iii); or

(6) With respect to an account holder
of another qualified intermediary that is a
direct or indirect account holder of QI, the
qualified intermediary allocates the pay-
ment to a chapter 4 withholding rate pool
of U.S. payees and provides the applicable
certification on a valid Form W-8IMY for
allocating the payment to this pool.

(B) Reportable Payments other than
Reportable Amounts. QI must file a
Form 1099 for a reportable payment
(other than a reportable amount) paid to
each U.S. non-exempt recipient (whether
a direct or indirect account holder), or to

any account holder that is presumed to be
a U.S. non-exempt recipient under section
5.13(C) of this Agreement. Notwithstand-
ing the previous sentence, QI is not re-
quired to file a Form 1099 for a reportable
payment (other than a reportable amount)
paid to a direct account holder that is (or is
presumed) a U.S. non-exempt recipient if-

(4) With respect to a reportable pay-
ment that is broker proceeds paid to a U.S.
non-exempt recipient, QI has applied the
procedures of section 3.05(C) of this
Agreement and QI does not know that the
other payor has failed to report or backup
withhold on the payment as required.

## SECTION 9. ADJUSTMENTS FOR OVER- AND UNDER- WITHHOLDING; REFUNDS

Sec. 9.01. Adjustments for Overwith-
holding by Withholding Agent When
QI Does Not Assume Primary With-
holding Responsibility. QI may request
that a withholding agent make an adjust-
ment for amounts paid to QI when the
withholding agent has overwithheld under
chapter 3 or 4 by applying either the re-
imbursement procedure described in sec-
tion 9.01(A) of this Agreement or the set-
off procedure described in section 9.01(B)

of this Agreement within the time period
prescribed for those procedures. Nothing
in this section shall be interpreted to re-
quire a withholding agent to apply the
reimbursement or set off procedures under
sections 9.01(A) or (B) of this Agreement.
See § 1.1474-2(a)(2) for the definition of
overwithholding that applies for purposes
of this section 9 with respect to an amount
withheld under chapter 4.

(A) Reimbursement Procedure. QI
may request a withholding agent to repay
QI for any amount overwithheld and for
the withholding agent to reimburse itself
under the reimbursement procedures de-
scribed in §§ 1.1461-2(a)(2)(i) and
1.1474-2(a)(3) by making the request be-
fore the earlier of the due date (without
regard to extensions) for the withholding
agent to file Form 1042 and Form 1042-S
for the calendar year of overwithholding
or the date the Form 1042-S is actually
filed with the IRS.

(B) Set-off Procedure. QI may request
a withholding agent to repay QI by apply-
ing the amount overwithheld against any
amount which otherwise would be re-
quired to be withheld under chapter 3 or 4
from income paid by the withholding
agent to QI under the set-off procedures of
§§ 1.1461-2(a)(3) and 1.1474-2(a)(4). QI
must make the request before the earlier
of the due date (without regard to exten-
sions) for the withholding agent to file
Form 1042-S for the calendar year of
overwithholding or the date that the Form
1042-S is actually filed with the IRS.

Sec. 9.02. Adjustments for Overwith-
holding by QI Assuming Primary With-
holding Responsibility. QI may make an
adjustment for amounts paid to its account
holders when QI has overwithheld by ap-
plying either the reimbursement or set-off
procedures described in this section 9.02
within the time period prescribed for those
procedures.

(A) Reimbursement Procedure. QI
may repay its account holders for an
amount overwithheld under chapter 3 or 4
and reimburse itself by reducing, by the
amount of tax actually repaid to the ac-
count holders, the amount of any subse-
quent deposit of tax required to be made
by QI under section 3.08 of this Agree-
ment. For purposes of this section
9.02(A), an amount that is overwithheld
shall be applied in order of time (i.e.,

sequentially) to each of the QI's subse-
quent deposit periods in the same calendar
year to the extent that the withholding
taxes required to be deposited for a sub-
sequent deposit period exceed the amount
actually deposited. An amount overwith-
held in a calendar year may be applied to
deposit periods in the calendar year fol-
lowing the calendar year of overwithhold-
ing only if:

(1) The repayment occurs before the
earlier of the due date (without regard to
extensions) for filing Form 1042-S for the
calendar year of overwithholding or the
date that the Form 1042-S is actually filed
by QI with the IRS;

(2) QI states on a Form 1042-S (is-
sued, if applicable, to the account holder
or otherwise to a chapter 3 or 4 reporting
pool), filed by March 15 of the calendar
year following the calendar year of over-
withholding, the amount of tax withheld
and the amount of any actual repayments;
and

(3) QI states on a Form 1042, filed by
March 15 of the calendar year following
the calendar year of overwithholding, that
the filing of the Form 1042 constitutes a
claim for credit in accordance with
§ 1.6414-1.

(B) Set-Off Procedure. QI may repay
its account holders by applying the
amount overwithheld against any amount
which otherwise would be required under
chapter 3 or 4 to be withheld from a
payment made by QI to the account hold-
ers before the earlier of March 15 of the
calendar year following the calendar year
of overwithholding or the date that the
Form 1042-S is actually filed with the
IRS. For purposes of making a return on
Form 1042 or 1042-S for the calendar
year of overwithholding, and for purposes
of making a deposit of the amount with-
held, the reduced amount shall be consid-
ered the amount required to be withheld
from such income under chapter 3 or 4.

Sec. 9.03. Repayment of Backup
Withholding. If QI erroneously with-
holds, as defined under § 31.6413(a)-3, an
amount under section 3406 from an ac-
count holder, QI may refund the amount
erroneously withheld as provided in
§ 31.6413(a)-3.

Sec. 9.04. Collective Credit or Re-
fund Procedures for Overwithholding.
If there has been overwithholding on

amounts subject to chapter 3 or 4 with-
holding paid to QI's account holders dur-
ing a calendar year and the amount has not
been recovered under the reimbursement
or set-off procedures as described in sec-
tion 9.01 or 9.02 of this Agreement, QI
may request a credit or refund of the total
amount overwithheld by following the
procedures of this section 9.04. QI shall
follow the procedures set forth under sec-
tions 6402 and 6414, and the regulations
thereunder, to claim the credit or refund.
No credit or refund will be allowed after
the expiration of the statutory period of
limitation for refunds under section 6511.
If there has been an overwithholding and
QI does not apply for a collective refund,
it must provide a Form 1042-S for the
payment that was subject to the overwith-
holding if requested by the account holder
receiving the payment.

(A) Payments for which a Collective
Refund is Permitted. Except as other-
wise provided in this section 9.04, QI may
use the collective refund procedures with
respect to all amounts subject to chapters
3 and 4 withholding. With respect to
amounts withheld under chapter 3 or 4, QI
shall not include in its collective refund
claim tax withheld on payments made to
an indirect account holder or a direct ac-
count holder of QI that is a nonqualified
intermediary or flow-through entity, and
with respect to amounts withheld under
chapter 4, if QI is a participating FFI or
registered deemed-compliant FFI, QI
shall not include in its collective refund
claim tax withheld on payments made to
any account holder described in the FFI
agreement or in § 1.1471-4(h)(2).

(B) Requirements for Collective Re-
fund. QI may use the collective refund
procedures under this section 9.04 only if
the following conditions are met:

(1) QI must not have issued Forms
1042-S to the account holders that re-
ceived the payment that was subject to
overwithholding;

(2) QI must submit together with its
amended Form 1042 on which it provides
a reconciliation of amounts withheld and
claims a credit or refund, a copy of the
Form 1042-S furnished to QI by its with-
holding agent reporting the taxes withheld
to which the claim relates (if applicable)
and a statement that includes the follow-
ing information and representations-

(i) The reason(s) for the overwithhold-
ing;

(ii) QI deposited the tax for which a
refund is being sought under section 6302
or received a Form 1042-S from its with-
holding agent showing the amount of tax
withheld, and neither QI nor its withhold-
ing agent has applied the reimbursement
or set-off procedure of §§ 1.1461-2 and
1.1474-2 to adjust the tax withheld to
which the claim relates;

(iii) QI has repaid or will repay the
amount for which refund is sought to the
appropriate account holders;

(iv) QI retains a record showing the
total amount of tax withheld, credits from
other withholding agents, tax assumed by
QI, adjustments for underwithholding,
and reimbursements for overwithholding
as its relates to each account holder and
also showing the repayment (if applica-
ble) to such account holders for the
amount of tax for which a refund is being
sought;

(v) QI retains valid documentation that
meets the requirements of chapter 3 or 4
(as applicable) to substantiate the amount
of overwithholding with respect to each
account holder for which the refund is
being sought; and

(vi) QI has not issued and will not issue
a Form 1042-S (or such other form as the
IRS may prescribe) to any account holder
with respect to the payments for which the
refund is being sought.

Sec. 9.05. Adjustments for Under-
withholding. If QI knows that an amount
should have been withheld under chapter
3 or 4 from a previous payment made to
an account holder but was not withheld,
QI may either withhold from future pay-
ments made pursuant to chapter 3 or chap-
ter 4 to the same account holder or payee
or satisfy the tax from property that it
holds in custody for such person or prop-
erty over which it has control. The addi-
tional withholding or satisfaction of the
tax owed described in the previous sen-
tence must be made before the due date
(not including extensions) of the Form
1042 for the calendar year in which the
underwithholding occurred. QI's respon-
sibilities under this section 9.05 will be
met if it informs a withholding agent from
which it received the payment of the un-
derwithholding and the withholding agent
satisfies the underwithholding.

Sec. 9.06. Underwithholding After
Form 1042 Filed. If, after a Form 1042
has been filed for a calendar year, QI, QI's
reviewer, or the IRS determines that QI
has underwithheld tax for such year, QI
shall file an amended Form 1042 to report
and pay the underwithheld tax. QI shall
pay the underwithheld tax, the interest due
on the underwithheld tax, and any appli-
cable penalties at the time of filing the
amended Form 1042. If QI fails to file an
amended return, the IRS shall make such
return under section 6020 and assess such
tax under the procedures set forth in the
Code.

## SECTION 10. COMPLIANCE PROCEDURES

### Sec. 10.01.

(A) In General. QI is required to adopt
a compliance program under the authority
of a responsible officer or, if QI adopts a
consolidated compliance program, under
the authority of a responsible officer of a
Compliance QI (as described in section
10.02(B) of this Agreement). QI's com-
pliance program must include policies,
procedures, and processes sufficient for
QI to satisfy the documentation, reporting,
and withholding requirements of this
Agreement and sufficient for a responsible
officer of QI (or Compliance QI) to make
the certifications required under section
10.03 of this Agreement. If QI is acting as
a QDD, QI's compliance program must
also include policies, procedures, and pro-
cesses sufficient for it to satisfy and report
its QDD tax liability and other reporting
required as a condition of its status as a
QDD. QI must also perform or arrange for
the performance of a periodic review de-
scribed in section 10.04 of this Agreement
to the extent required by that section. As
part of the responsible officer's certifica-
tion, QI must provide to the IRS the fac-
tual information referenced in sections
10.04 and 10.05 of this Agreement and in
Appendix I to this Agreement. QI must
also satisfy the requirements of section
10.06 of this Agreement with respect to
the report covering the periodic review,
and must comply with the IRS review
described in section 10.08 of this Agree-
ment. With respect to QI that, prior to
January 1, 2017, was a limited FFI (as
defined in § 1.1471-1(b)(77) (or a limited

branch, as defined in § 1.1471-1(b)(76)),
references in this section 10 (and in Ap-
pendix I to this Agreement) to QI's
FATCA Requirements as a Participating
FFI, Registered Deemed-Compliant FFI,
or Registered Deemed-Compliant Model
1 IGA FFI include its requirements under
§ 1.1471-4(e)(4) for purposes of its initial
certification period.

(B) Coordination with FATCA Re-
quirements as a Participating FFI, Reg-
istered Deemed-Compliant FFI, or Reg-
istered Deemed-Compliant Model 1
IGA FFI and, for a Direct Reporting
NFFE, the Requirements of § 1.1472-
1(c)(3). As a condition for maintaining QI
status, QI must comply with its FATCA
requirements as applicable to its chapter 4
status (including any applicable compli-
ance procedure) with respect to each
branch of QI operating under this Agree-
ment. Therefore, QI must, as part of the
compliance procedures described in this
section 10 (including in conducting the
periodic review described in section 10.04
of this Agreement and in making the pe-
riodic certification described in section
10.03 of this Agreement) determine
whether it is compliant with its FATCA
requirements as a participating FFI, regis-
tered deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI and,
in the case of a direct reporting NFFE, its
requirements under § 1.1472-1(c)(3),
with respect to accounts for which it acts
as a qualified intermediary. See the com-
pliance procedures, if any, applicable to
QI's FATCA requirements as a participat-
ing FFI, registered deemed-compliant
FFI, or registered deemed-compliant
Model 1 IGA FFI and, in the case of a
direct reporting NFFE with respect to all
accounts that it maintains or all of its
shareholders. If QI is a participating FFI
or direct reporting NFFE, QI will be able
to make the certification described in sec-
tion 10.03 of this Agreement, and the cer-
tification described in the FFI Agreement,
to the extent provided in future published
guidance or other instructions.

10.02. Responsible Officer. QI must
appoint an individual as a responsible of-
ficer as defined in section 2.78 of this
Agreement. The responsible officer must
be identified on the FATCA registration
website as QI's responsible party, and
such person may, but is not required to, be

the same responsible officer for purposes
of compliance with QI's FATCA require-
ments as a participating FFI, registered
deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI and,
in the case of a direct reporting NFFE, its
requirements under § 1.1472-1(c)(3). The
responsible officer (or the responsible off-
icer's designee) must establish a compli-
ance program that meets the requirements
of this section 10.02 and must make the
periodic certifications to the IRS de-
scribed in section 10.03 of this Agree-
ment. The responsible officer of QI must
be an officer of QI with sufficient author-
ity to fulfill the duties of a responsible
officer described in this section 10. The
responsible officer (or a delegate ap-
pointed by the responsible officer) must
also serve as the point of contact for the
IRS for all issues related to this Agree-
ment and for complying with IRS requests
for information or additional review pro-
cedures under section 10.07 of this Agree-
ment.

(A) Compliance Program. The re-
sponsible officer (or the responsible off-
icer's designee) must establish a program
for QI to comply with the requirements of
this Agreement that includes the follow-
ing-

(1) Written Policies and Procedures.
The responsible officer (or designee) must
ensure the drafting and updating, as nec-
essary, of written policies and procedures
sufficient for QI to satisfy the documen-
tation, withholding, reporting, and other
obligations of this Agreement, including,
with respect to QI that is acting as a QDD,
its QDD tax liability. Such written poli-
cies and procedures must include a pro-
cess for employees of QI to raise issues to
the responsible officer (or the responsible
officer's designee) that concern QI's com-
pliance with this Agreement.

(2) Training. The responsible officer
(or designee) must communicate such pol-
icies and procedures to any line of busi-
ness of QI that is responsible for obtain-
ing, reviewing, and retaining a record of
documentation under the requirements of
section 5 of this Agreement; making pay-
ments subject to withholding under sec-
tion 3 of this Agreement; reporting pay-
ments and accounts as required under
sections 7 and 8 of this Agreement; or
entering into potential section 871(m)

transactions in the case of QI that is acting
as a QDD.

(3) Systems. The responsible officer
(or designee) must ensure that systems
and processes are in place that will allow
QI to fulfill its obligations under this
Agreement. For example, in order to ful-
fill QI's obligations to report on Forms
1042-S, 1099, and 8966 under section 8
of this Agreement, QI must establish sys-
tems for documenting account holders and
for recording the information with respect
to each such account that QI is required to
report under that section.

(4) Monitoring of Business Changes.
The responsible officer (or designee) must
monitor business practices and arrange-
ments that affect QI's compliance with
this Agreement, including, for example,
QI's acquisition of lines of businesses or
accounts that give rise to documentation,
withholding, or reporting obligations un-
der this Agreement.

(5) QDD Tax Liability Determina-
tions. If QI is acting as a QDD, the re-
sponsible officer must ensure that the
QDD has appropriate systems in place to
make the necessary determinations and
calculations to identify section 871(m)
transactions, potential section 871(m)
transactions, underlying securities associ-
ated with potential section 871(m) trans-
actions, the amount of dividend or divi-
dend equivalent payments received, and
the amount of dividend equivalent or
qualifying dividend equivalent offsetting
payments made and contractually obli-
gated to be made by the QDD, as well as
whether a transaction is as a principal or
non-principal and in a dealer or non-
dealer capacity. This includes appropriate
systems to, where required, calculate the
delta for a potential section 871(m) trans-
action, perform the substantial equiva-
lence test described in § 1.871-15(h), cal-
culate the amount of a dividend equivalent
or qualifying dividend equivalent offset-
ting payment, determine any QDD tax
liability amount (or part thereof) and its
timing, and determine what payments are
received, made, or contractually obligated
to be made with respect to potential sec-
tion 871(m) transactions, underlying secu-
rities associated with potential section
871(m) transactions, and other underlying
securities as a principal and whether in its
dealer capacity or non-dealer capacity.

The systems must also take into account
information received pursuant to § 1.871-
15(p).

(6) Periodic Review. Unless QI re-
ceives a waiver (the requirements of
which are described in section 10.07(B) of
this Agreement), the responsible officer
(or designee) must designate a reviewer
that meets the qualifications described in
section 10.04(A) of this Agreement to per-
form the periodic review as described in
section 10.05 of this Agreement, to the
extent required by that section.

(7) Certification of Internal Con-
trols. The responsible officer (or desig-
nee) must make the periodic certification
as described in section 10.03 of this
Agreement, including ensuring that cor-
rective actions are taken in response to
any material failures (as defined in section
10.03(D) of this Agreement) of QI's com-
pliance with this Agreement and its
FATCA requirements as a participating
FFI, registered deemed-compliant FFI, or
registered deemed-compliant Model 1
IGA FFI and, in the case of a direct re-
porting NFFE, its requirements under
§ 1.1472-1(c)(3). The responsible officer
may rely on any reasonable procedure,
process, or review that enables the respon-
sible officer to make the certification de-
scribed in this section 10.03.

(B) Consolidated Compliance Pro-
gram. The IRS, in its discretion, may
permit a consolidated compliance pro-
gram that includes two or more QIs that
are members of a group of entities under
common ownership when the QIs: (i) op-
erate under a uniform compliance pro-
gram for purposes of this Agreement; (ii)
share practices, procedures, and systems
subject to uniform monitoring and con-
trol; and (iii) are subject to a consolidated
periodic review that includes a review of
internal controls and testing of transac-
tions relevant to this Agreement with re-
spect to each QI in the consolidated com-
pliance program. Each QI that is a
member of a consolidated compliance
program must designate a Compliance QI
to act on its behalf, and the responsible
officer of the Compliance QI must iden-
tify itself as such when making its peri-
odic certification and must comply with
the identification, certification of internal
controls, and periodic review require-
ments for the QI consolidated compliance

program as the IRS may prescribe. The
Compliance QI must also agree to be
jointly and severally liable for the obliga-
tions and liabilities of any QI in its con-
solidated compliance program relating to
the QI's obligations under this Agree-
ment.

10.03. Certification of Internal Con-
trols by Responsible Officer. On or be-
fore July 1 of the calendar year following
the certification period, QI must make the
certification described in either section
10.03(A) or (B) of this Agreement. The
initial certification period is the period
ending on the third full calendar year that
this Agreement is in effect (including re-
newals of this Agreement). Subsequent
certification periods will be every three
calendar years following the initial certi-
fication period (including renewals of this
Agreement). The certification of internal
controls required by this section 10.03
applies only to the internal controls re-
lated to QI's compliance with this Agree-
ment and its FATCA requirements as a
participating FFI, registered deemed-
compliant FFI, or registered deemed-
compliant Model 1 IGA FFI and, in the
case of a direct reporting NFFE, its re-
quirements under § 1.1472-1(c)(3), with
respect to accounts for which it acts as a
qualified intermediary, and does not relate
to any other obligations or requirements.
The responsible officer may rely on any
reasonable procedure, process, or review
that enables the responsible officer to
make the certification described in this
section 10.03. If the responsible officer
relies on an internal or external review for
this purpose, the internal or external re-
viewer must be independent, as described
in section 10.04 of this Agreement. The
responsible officer must document the
procedure, process, or review relied upon
in making the certification. QI (or its
Compliance QI) must make the certifica-
tions of compliance in such manner as the
IRS may prescribe.

(A) Certification of Effective Inter-
nal Controls. The responsible officer
must certify to the following and disclose
any material failures that occurred during
the certification period or during any prior
period if the material failure was not dis-
closed as part of a prior certification or
written disclosure made by QI to the
IRS-

(1) QI has established a compliance
program that meets the requirements de-
scribed in section 10.02(A) or (B) (if ap-
plicable) of the QI Agreement that is in
effect as of the date of the certification and
during the certification period;

(2) Based on the information known
(or information that reasonably should
have been known) to the responsible offi-
cer, including the findings of any proce-
dure, process, or review undertaken in
preparation for the responsible officer's
certification of internal controls, QI main-
tains effective internal controls over its
documentation, withholding, and report-
ing obligations under the QI Agreement
and according to its applicable FATCA
requirements, with respect to accounts for
which it acts as a qualified intermediary,
and, if QI is acting as a QDD, it maintains
effective internal controls over its compu-
tation and tax obligations under the QI
Agreement and the regulations under sec-
tion 871(m);

(3) Based on the information known
(or information that reasonably should
have been known) to the responsible offi-
cer, including the findings of any proce-
dure, process, or review undertaken in
preparation for the responsible officer's
certification of internal controls, there are
no material failures, as defined in section
10.03(D) of the QI Agreement, or, if there
are any material failures, they have been
corrected as of the date of this certifica-
tion, and such failures are identified as
part of this certification as well as the
actions taken to remediate such failures
and to prevent their reoccurrence by the
date of this certification;

(4) With respect to any failure to with-
hold, deposit, or report to the extent re-
quired under the QI Agreement, or, with
respect to QI that is acting as a QDD, any
failure to pay its QDD tax liability, QI has
corrected such failure by paying any taxes
due (including interest and penalties) and
filing the appropriate return (or amended
return);

(5) All PAIs of QI and partnerships and
trusts to which QI applies the agency op-
tion have either (a) provided (or will pro-
vide, to the extent QI does not obtain a
waiver under section 10.07 of the QI
Agreement) documentation and other nec-
essary information for inclusion in QI's
periodic review or (b) provided the re-

sponsible officer of QI with a certification
of effective internal controls meeting the
requirements of this section 10.03(A) of
the QI Agreement and have represented to
QI that there are no material failures, as
defined in section 10.03(D) of the QI
Agreement, or, if there are such failures,
they have been corrected as of the time of
this certification, and the PAIs, partner-
ships, or trusts have disclosed any such
failures to QI together with the actions
taken by the PAI, partnership, or trust to
remediate such failures;

(6) QI's policies, procedures, and pro-
cesses are applied consistently to all
branches covered by the QI Agreement
(except as otherwise required by a juris-
diction's AML/KYC procedures, as appli-
cable);

(7) If QI is acting as a QDD, it has
acted as a QDD for all payments with
respect to potential section 871(m) trans-
actions and underlying securities for
which it is required to act as a QDD and
no other transactions or underlying secu-
rities;

(8) If QI is acting as a QI and has
assumed primary withholding responsibil-
ity with respect to payments of substitute
interest (as described in section 3.03(A) of
the QI Agreement), QI has assumed pri-
mary withholding responsibility for all
such payments covered by the QI Agree-
ment;

(9) A periodic review was conducted
for the certification period in accordance
with section 10.04 of the QI Agreement,
and the results of such review are reported
to the extent required in sections 10.05
and 10.06 of the QI Agreement.

(B) Qualified Certification. If the re-
sponsible officer has identified an event of
default or a material failure that QI has not
corrected as of the date of the certification,
the responsible officer must certify to the
following statements-

(1) The responsible officer (or desig-
nee) has identified an event of default as
defined in section 11.06 of the QI Agree-
ment, or has determined that, as of the
date of the certification, there are one or
more material failures as defined in sec-
tion 10.03(D) of the QI Agreement with
respect to QI's compliance, its PAI's com-
pliance, or the compliance of a partnership
or trust to which QI applies the agency
option and that appropriate actions will be

taken to prevent such failures from reoc-
curring;

(2) With respect to any failure to with-
hold, deposit, or report to the extent re-
quired under the QI Agreement, or with
respect to QI that is acting as a QDD, a
failure to pay its QDD tax liability, QI will
correct such failure by paying any taxes
due (including interest and penalties) and
filing the appropriate return (or amended
return); and

(3) The responsible officer (or an offi-
cer of the PAI or partnership or trust to
which QI applies the agency option if the
PAI or partnership or trust performs its
own periodic review) will respond to any
notice of default (if applicable) or will
provide (either directly or through QI) to
the IRS, to the extent requested, a descrip-
tion of each material failure and a written
plan to correct each such failure.

(C) PAIs and Partnership or Trust
to which QI applies the Agency Option.
Unless QI has received a waiver of the
periodic review requirement, any PAI
with which QI has an agreement and any
partnership or trust to which QI applies
the agency option must provide its docu-
mentation and other information to QI for
inclusion in QI's periodic review or con-
duct an independent periodic review and
provide a written certification to QI as
described in section 10.03 of this Agree-
ment regarding its compliance with the
requirements of the PAI or agency agree-
ment. Such certification must be available
to the IRS upon a request made as part of
the review described in section 10.07 of
this Agreement (with a certified transla-
tion into English if the certification is not
in English).

(D) Material Failures.

(1) Material Failures Defined. A ma-
terial failure is generally a failure of QI to
fulfill the requirements of this Agreement
or its FATCA requirements as a partici-
pating FFI, registered deemed-compliant
FFI, or registered deemed-compliant
Model 1 IGA FFI and, in the case of a
direct reporting NFFE, its requirements
under § 1.1472-1(c)(3). For purposes of
the certifications described in section
10.03(A) and (B) of this Agreement, a
material failure is limited to the following:

(i) QI's establishing of, for financial
statement purposes, a tax reserve or pro-

vision for a potential future tax liability
related to QI's failure to comply with this
Agreement, including its FATCA require-
ments as a participating FFI, registered
deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI, or,
in the case of a direct reporting NFFE, its
requirements under § 1.1472-1(c)(3), and
with respect to QI that is acting as a QDD,
failure to satisfy its QDD tax liability and
its obligations pursuant to section 871(m)
and the regulations under that section.

(ii) QI's failure to establish written pol-
icies, procedures, or systems sufficient for
the relevant personnel of QI to take ac-
tions consistent with QI's obligations un-
der this Agreement, including, its FATCA
requirements as a participating FFI, regis-
tered deemed-compliant FFI, registered
deemed-compliant Model 1 IGA FFI, or,
in the case of a direct reporting NFFE, its
requirements under § 1.1472-1(c)(3), or if
QI is acting as a QDD, its obligations as a
QDD under this Agreement or pursuant to
section 871(m) and the regulations under
that section.

(iii) A criminal or civil penalty or sanc-
tion imposed on QI (or any branch or
office thereof) by a regulator or other gov-
ernmental authority or agency with over-
sight over QI's compliance with AML/
KYC procedures to which QI (or any
branch or office thereof) is subject and
that is imposed due to QI's failure to
properly identify account holders under
the requirements of those procedures.

(iv) A finding (including a finding
noted in the periodic review report de-
scribed in section 10.06 of this Agree-
ment) for one or more years covered by
this Agreement that QI failed to-

(a) Withhold an amount that QI was
required to withhold under chapter 3 or 4
or under section 3406 as required under
section 3 of this Agreement or, if QI is
acting as a QDD, failing to timely pay its
QDD tax liability;

(b) Provide information sufficient for
another withholding agent to perform
withholding and reporting to the extent
required when QI does not assume pri-
mary chapters 3 and 4 withholding re-
sponsibility or primary Form 1099 report-
ing and backup withholding responsibility;

recipient account holders) by January 15
as required by that section when QI ap-
plies the alternative withholding rate pool
procedures;

(d) Make deposits in the time and man-
ner required by section 3.08 of this Agree-
ment or make adequate deposits to satisfy
its withholding obligations, or, if QI is
acting as a QDD, satisfy its QDD tax
liability, taking into account the proce-
dures under section 9 of this Agreement;

(e) Report or report accurately on
Forms 1099 as required under section 8.06
of this Agreement or provide information
to the extent QI does not assume primary
Form 1099 reporting and backup with-
holding responsibilities;

(f) Report or report accurately on
Forms 1042 and 1042-S under sections 7
and 8 of this Agreement, or, if QI is acting
as a QDD, obtain any necessary waiver
from reporting or maintain the name, ad-
dress, and TIN of a significant number of
U.S. non-exempt recipients to whom the
QDD makes a payment that otherwise
would be a qualifying dividend equivalent
offsetting payment but for the limitation
in section 2.70(B) of this Agreement; or

(g) Report or report accurately on
Form 8966 under sections 8.04 and 8.05
of this Agreement.

(2) Limitations on Material Failures.
A failure described in section
10.03(D)(1)(iv) of this Agreement is a
material failure only if the failure was the
result of a deliberate action on the part of
one or more employees of QI to avoid the
requirements of this Agreement with re-
spect to one or more account holders of
QI, or was an error attributable to a failure
of QI to establish or implement internal
controls sufficient for QI to meet the re-
quirements of this Agreement. Regardless
of these limitations for certification pur-
poses, QI is required to correct a failure to
withhold or deposit tax under section 3 of
this Agreement, or to report under section
7 or 8 of this Agreement, or, for a QI that
is acting as a QDD, to pay its QDD tax
liability, by depositing the amount of tax
required to have been withheld and by
filing the appropriate return (or amended
return).

Sec. 10.04. Periodic Review Absent
Waiver. Unless the QI receives a waiver
(the requirements of which are described
in section 10.07(B) of this Agreement), at

the time QI provides the certification of
internal controls, provided in section
10.03 of this Agreement, QI must also
provide certain factual information re-
garding its accounts, withholdable pay-
ments, amounts subject to chapter 3 with-
holding, and, if QI is acting as a QDD,
section 871(m) transactions, potential sec-
tion 871(m) transactions, and its QDD tax
liability based on the results of a periodic

review. The factual information requested
is included in Appendix I to this Agree-
ment. The IRS will prescribe the manner
in which the information must be reported
in additional published guidance or other
instructions.

(A) Independent Reviewer. The peri-
odic review may be performed by an in-
ternal reviewer (such as an internal audi-
tor) that is an employee of QI ("internal
reviewer"), an internal reviewer that is an
employee of a Compliance QI in the case
of a consolidated compliance program, or
a certified public accountant, attorney, or
third-party consultant ("external re-
viewer"), or any combination thereof.

(1) Internal Reviewer. QI may desig-
nate an internal reviewer to perform the
periodic review (or a portion of the peri-
odic review) only when the internal re-
viewer is competent with respect to the
requirements of this Agreement. The in-
ternal reviewer must also be able to report
findings that reflect the independent judg-
ment of the reviewer. The internal re-
viewer must not be reviewing its own
work, procedures, or results (e.g., the in-
ternal reviewer, in reviewing QI's docu-
mentation cannot be part of the team pri-
marily responsible for collecting and
validating documentation). The results of
the periodic review and the internal re-
viewer's reporting of such results to the
responsible officer cannot influence or af-
fect the compensation, bonus, employ-
ment status, or employee review of the
internal reviewer. The IRS has the right to
request the performance of the periodic
review by an alternative reviewer if the
IRS, in its sole discretion, reasonably be-
lieves that the reviewer selected by QI was
not independent, as described in this Agree-
ment, or did not perform an effective peri-
odic review under this Agreement.

(2) Internal Reviewer of the Compli-
ance QI. The Compliance QI may desig-
nate an internal reviewer to perform the

consolidated periodic review (or a portion
of the consolidated periodic review). See
section 10.02(B) of this Agreement. The
internal reviewer of the Compliance QI
must meet the requirements of section
10.04(A)(1) of this Agreement with re-
spect to both the Compliance QI and each
QI that is a member of the consolidated
compliance program.

(3) External Reviewer. QI may en-
gage an external reviewer that is a certi-
fied public accountant, attorney, or third-
party consultant that is regularly engaged
in the practice of performing reviews of
clients' policies, procedures, and pro-
cesses for complying with accounting,
tax, or regulatory requirements (including
assisting clients in determining such com-
pliance). The external reviewer cannot be
reviewing systems, policies, or procedures
or the results thereof that it was involved
in designing, implementing, or maintain-
ing. The external reviewer must be in
good standing with and comply with any
applicable professional standards for
maintaining its license as an accountant or
attorney (or other third-party consultant).
The external reviewer is not required to
make an attestation or render an opinion
regarding QI's compliance with this
Agreement or QI's compliance with its
FATCA requirements as a participating
FFI, registered deemed-compliant FFI, or
registered deemed-compliant Model 1
IGA FFI and, in the case of a direct re-
porting NFFE, its requirements under
§ 1.1472-1(c)(3), but the reviewer must
be able to perform the periodic review as
specified in section 10.05 of this Agree-
ment. QI must permit the external re-
viewer to have access to all relevant re-
cords of QI for purposes of performing the
review, including information regarding
specific account holders. Additionally, the
engagement between the external re-
viewer and QI must impose no restrictions
on QI's ability to provide the results of the
review to the IRS. However, the external
reviewer is not required to divulge the
identity of QI's account holders to the
IRS, except as otherwise provided under
QI's FATCA requirements as a participat-
ing FFI, registered deemed-compliant
FFI, or registered deemed-compliant
Model 1 IGA FFI. QI must permit the IRS
to communicate directly with the external
reviewer, and any legal prohibitions that

prevent the IRS from communicating di-
rectly with the reviewer must be waived.

Sec. 10.05. Scope and Timing of Re-
view. The responsible officer of QI (or of
the Compliance QI) must require the re-
viewer to test accounts related to QI's
documentation, withholding, reporting,
and other obligations under this Agree-
ment, including its QDD tax liability with
respect to QI that is acting as a QDD, and
its FATCA requirements as a participating
FFI, registered deemed-compliant FFI, or
registered deemed-compliant Model 1
IGA FFI and, in the case of a direct re-
porting NFFE, its requirements under
§ 1.1472-1(c)(3) for accounts for which it
is acting as a qualified intermediary, and
to identify deficiencies in meeting these
obligations. Any PAI with which QI has
an agreement and any partnership or trust
to which QI applies the agency option
must provide the information necessary
for QI to test accounts and transactions of
such entity as part of QI's periodic review
unless such entity conducts an its own
periodic review and provides QI with the
report documenting the results of such
review as described in section 10.06 of
this Agreement. Unless otherwise ap-
proved by the IRS, the review must in-
clude the steps described in section
10.05(A) of this Agreement.

QI is required to arrange for the per-
formance of one review for the certifica-
tion period to evaluate QI's documenta-
tion, withholding, and reporting practices.
If QI is acting as a QDD, this should also
include a review of its determination as to
whether transactions are section 871(m)
transactions, its computations and deter-
minations of dividend equivalent amounts
and qualifying dividend equivalent offset-
ting payments, and its calculation of its
QDD tax liability. The review may be
conducted for any calendar year covered
by the certification period. However, all
results of the review must relate to one
calendar year. If QI is acting as a QDD
and has an initial certification period end-
ing December 31, 2017, it must use cal-
endar year 2017 for its review of its QDD
accounts and activities for the initial cer-
tification period. QI may conduct a review
for a particular calendar year if, on the due
date for reporting the factual information
relating to the periodic review (provided
in section 10.04 of this Agreement), there

are 15 or more months available on the
period for assessment under section
6501(a) of the calendar year for which the
review is to be conducted or the QI's
submits, upon request, a Form 872, Con-
sent to Extend the Time to Assess Tax,
that will satisfy the 15-month require-
ment. The Form 872 must be submitted to
the IRS at the address provided in section
12.06 of this Agreement.

QI may use a sample to test accounts if
there are more than 50 accounts to review.
If QI has fewer than 50 accounts, it must
review all accounts and cannot use a sam-
ple to test accounts. To the extent appli-
cable, the reviewer must separately review
its QI activities (when not acting in its
QDD capacity), QI acting as a QDD ac-
tivities, and substitute interest payments
for which QI assumed primary withhold-
ing responsibility (as described in section
3.03(A) of this Agreement). The reviewer
is required to record its sampling proce-
dures and to maintain the ability to recon-
struct the sample. Further, the review is
not required to include statistical sampling
procedures for testing transactions, but the
reviewer must document its methodology
for sampling determinations. A safe har-
bor methodology and additional informa-
tion on the use of statistical sampling is
provided in Appendix II to this Agree-
ment.

If the reviewer determines that under-
withholding has occurred, QI shall report
and pay any amount due. QI must also
notify the IRS Foreign Intermediaries
Team at the address provided in section
12.06 of this Agreement of the underwith-
holding discovered as a result of the re-
view. If the reviewer used a sampling
method for its review, see Appendix II to
this Agreement for an allowance in certain
cases to use a projection method to deter-
mine the amount of underwithholding.

(A) Documentation. The reviewer
must-

(1) Review QI's accounts, to ensure
that QI obtained documentation that meets
the requirements described in sections
5.01 through 5.09 of this Agreement;

(2) Review QI's accounts for which
treaty benefits are claimed, to ensure that
QI obtained the treaty statements and lim-
itation on benefits information required by
section 5.03(B) of this Agreement;

(3) Review information contained in
account holder files to determine if the
documentation validity standards of sec-
tion 5.10 of this Agreement have been
met. For example, the reviewer must ver-
ify that changes in account holder infor-
mation (e.g., a change of address to a U.S.
address or change of account holder status
from foreign to U.S. or a change in chap-
ter 4 status from participating FFI to non-
participating FFI) are being conveyed to
QI's withholding agents;

(4) Review the accounts for which QI
is acting as a QI to ensure that QI is
obtaining, reviewing, and maintaining
documentation in accordance with its
FATCA requirements as a participating
FFI, registered deemed-compliant FFI, or
registered deemed-compliant Model 1
IGA FFI and, in the case of a direct re-
porting NFFE, its requirements under
§ 1.1472-1(c)(3);

(5) Review accounts held by U.S. non-
exempt recipient account holders, to de-
termine if QI obtained Forms W-9, and, if
QI does not assume primary Form 1099
reporting and backup withholding respon-
sibility, that QI transmitted those forms to
a withholding agent consistent with this
Agreement;

(6) For a QI that is a QDD, review
accounts for which QI is acting as a QDD
and that received a reportable payment or
a qualified dividend equivalent offsetting
payment (notwithstanding the limitation
in section 2.70(B) of this Agreement) to
determine whether QI has documented the
status of account holders under the re-
quirements described in sections 5.01
through 5.09 of this Agreement; and

(7) For a QI that makes payments of
U.S. source substitute interest and as-
sumes primary chapters 3 and 4 withhold-
ing responsibility for such amounts, re-
view accounts of persons to which QI
pays U.S. source substitute interest to de-
termine whether QI has documented the
status of such persons under the require-
ments described in sections 5.01 through
5.09 of this Agreement.

(B) Withholding Rate Pools. The re-
viewer must-

(1) Perform checks using account hold-
ers assigned to each withholding rate pool,
and cross check that assignment against
the documentation provided by, or the
presumption rules applied to, the account

holder, the type of income earned, and the
withholding rate applied;

(2) Verify, if QI is using the procedure
for U.S. non-exempt recipients described
in section 6.03(D) of this Agreement, that
QI is providing sufficient and timely in-
formation to withholding agents that allo-
cates reportable payments to U.S. non-
exempt recipients; and

(3) With respect to a partnership or
trust described in section 4.05 of this
Agreement, if applicable, perform test
checks, using account holder documenta-
tion for the selected partners, beneficia-
ries, or owners and records of each type of
reportable amount paid by QI to the entity,
to determine whether the highest rate of
withholding applicable to each type of
reportable amount was applied.

### (C) Withholding Responsibilities. The reviewer must-

(1) To the extent QI has assumed pri-
mary chapters 3 and 4 withholding re-
sponsibilities, perform test checks, using
recalcitrant account holders and nonpar-
ticipating FFIs, to verify that QI withheld
the proper amounts under chapter 4;

(2) To the extent QI has assumed pri-
mary chapters 3 and 4 withholding re-
sponsibility, perform test checks, using
foreign account holders for which no
withholding is required under chapter 4
based on the payees chapter 4 status, to
verify that QI withheld the proper
amounts under chapter 3 and properly ap-
plied the exemptions from chapter 4 with-
holding;

(3) To the extent QI has not assumed
primary chapters 3 and 4 withholding re-
sponsibility, verify that QI has fulfilled its
responsibilities under section 3.02 of this
Agreement (including withholding if QI
failed to provide the required information
to a withholding agent to withhold on
payments);

(4) To the extent QI has assumed pri-
mary Form 1099 reporting and backup
withholding responsibility, perform
checks using U.S. non-exempt recipient
account holders to verify that QI backup
withheld when required;

(5) To the extent QI has not assumed
primary Form 1099 reporting and backup
withholding responsibility, perform test
checks using U.S. non-exempt account
holders to verify that QI fulfilled its
backup withholding responsibilities under

sections 3.04 through 3.06 of this Agree-
ment;

(6) Verify that amounts withheld by QI
were timely deposited in accordance with
section 3.08 of this Agreement;

(7) To the extent that QI is acting as a
QDD, determine that QI withheld when
required on payments that it made with
respect to potential section 871(m) trans-
actions; and

(8) To the extent that QI makes pay-
ments of U.S. source substitute interest
and assumes chapter 3 and 4 withholding
responsibility for such amounts, deter-
mine that QI withheld when required on
such payments.

(D) Return Filing and Information
Reporting. The reviewer must-

(1) Obtain copies of original and
amended Forms 1042 and 945, and any
schedules, statements, or attachments re-
quired to be filed with those forms, verify
that the forms have been filed, and deter-
mine whether the amounts of income,
taxes, and other information reported on
those forms are accurate by-

(i) Reviewing copies of Forms 1042-S
that withholding agents have provided QI
to determine whether QI properly reported
the amount of taxes withheld by other
withholding agents on Form 1042;

(ii) Reviewing account statements and
correspondence from withholding agents;

(iii) Determining that adjustments to
the amount of tax shown on Form 1042
(and any claim by QI for refund or credit)
properly reflect the adjustments to with-
holding made by QI using the reimburse-
ment or set off procedures under section
9.02 of this Agreement and are supported
by sufficient documentation;

(iv) Reconciling amounts shown on
Forms 1042 with amounts shown on Form
1042-S (including the amount of taxes
reported as withheld);

(v) If QI is acting as a QDD, reviewing
the reconciliation schedule described in
section 7.01(c) of this Agreement and any
information used to prepare such schedule
or compute its QDD tax liability, includ-
ing information received pursuant to
§ 1.871-15(p), reviewing the amounts re-
quired to determine its section 871(m)
amounts and its QDD tax liability over the
applicable period, and reviewing such in-
formation to determine whether the sec-

tion 871(m) amounts and QDD tax liabil-
ity have been properly calculated;

(vi) If QI is acting as a QDD, review-
ing amounts shown on Forms 1042 (in-
cluding the reconciliation schedule) and
Forms 1042-S, as well as any information
received pursuant to § 1.871-15(p), to de-
termine whether the QDD properly took
the information into account (e.g., to cal-
culate its QDD tax liability);

(vii) In the case of collective credits or
refunds, reviewing the statements attached
to amended Forms 1042 filed to claim a
collective refund, determine whether
those forms are accurate, and-

(a) Determine the causes of any over-
withholding reported and ensure QI did
not issue Forms 1042-S to persons whom
it included as part of its collective credit
or refund;

(b) Determine that QI repaid the appro-
priate account holders and that the amount
of the claim is accurate and supported by
adequate documentation; and

(c) Determine that QI did not include
payments made to a partnership or trust
described in section 4.05 of this Agree-
ment.

(2) Obtain copies of original and cor-
rected Forms 1042-S and Forms 1099
filed by QI together with the work papers
used to prepare those forms, and deter-
mine whether the amounts reported on
those forms are accurate by-

(i) Reconciling payments and tax re-
ported on Forms 1042-S received from
withholding agents with amounts (includ-
ing characterization of income) and taxes
reported by QI as withheld on Forms
1042-S and determining the reason(s) for
any variance;

(ii) Reviewing the Forms W-8IMY,
and the associated withholding state-
ments, that QI has provided withholding
agents;

(iii) Reviewing account statements is-
sued by QI to account holders;

(iv) Determining, in the case in which
QI utilized the reimbursement or set-off
procedure, that QI satisfied the require-
ments of section 9.02 of this Agreement
and that the adjusted amounts of tax with-
held are properly reflected on Forms
1042-S.

(3) Obtain copies of original and
amended Forms 8966 of accounts for
which QI is acting as a qualified interme-

diary, and determine whether the amounts
of income and other information reported
on Forms 8966 are accurate by-

(i) Reviewing U.S. accounts (or U.S.
reportable accounts for which QI acts as a
qualified intermediary) to determine that
such accounts were reported in accor-
dance with QI's FATCA requirements as
a participating FFI, registered deemed-
compliant FFI, or registered deemed-
compliant Model 1 IGA FFI;

(ii) If QI is an NFFE acting as a qual-
ified intermediary on behalf of its share-
holders, confirming that any direct or in-
direct shareholders that are substantial
U.S. owners were reported in accordance
with § 1.1472-1(c)(3);

(iii) If QI is an NFFE acting as a qual-
ified intermediary on behalf of persons
other than its shareholders, confirming
that if QI is acting on behalf of a passive
NFFE with substantial U.S. owners, with-
holdable payments made to the passive
NFFE and the information regarding its
substantial U.S. owners were reported;

(iv) Confirming with respect to any
nonqualified intermediary or flow-through
entity that provides information regarding
an account holder (or interest holder) that
is an NFFE (other than an excepted
NFFE) with one or more substantial U.S.
owners that such substantial U.S. owners
were reported to the extent required under
section 8.04(B) of this Agreement;

(v) Reviewing the documentation pro-
vided by a PAI or a partnership or trust to
which QI applied the agency option to
determine that QI reported on Form 8966
to the extent required under section 4 of
this Agreement; and

(vi) Reviewing work papers used to
prepare these forms.

(4) If QI is acting as a QDD, the re-
viewer must also review accounts desig-
nated as accounts for which QI acted as a
QDD to determine whether QI is acting as
a QDD with respect to all potential section
871(m) transactions and underlying secu-
rities for which it is required to act as a
QDD and not any other transactions or
underlying securities and whether the sec-
tion 871(m) amount includes the amounts
in its dealer capacity and not amounts in
its non-dealer capacity.

(E) Significant Change in Circum-
stances. The reviewer must verify that in
the course of the review it has not discov-

ered any significant change in circum-
stances, as described in section 11.04(A),
(D), (E), or (J) of this Agreement.

### Sec. 10.06 Periodic Review Report.

(A) In General. The results of the pe-
riodic review must be documented in a
written report addressed to the responsible
officer of QI and must be available to the
IRS upon request (with a certified trans-
lation into English if the report is not in
English). The report must describe the
scope of the review and the actions per-
formed to satisfy each requirement of sec-
tion 10.05(A) through (E), including the
methodology for sampling determina-
tions. The report may include explanatory
footnotes to clarify the results of the re-
port. Recommendations may be included
but are not required to be provided in the
report. The periodic review report should
form the basis for the factual information
provided by QI that is set forth in Appen-
dix I.

In addition to the findings of section
10.05 of this Agreement, the periodic re-
view report should also include details
regarding the documentation and tax de-
posit and payment failures identified by
the reviewer but then cured before the
periodic review report is finalized. While
the curing of inadequate documentation is
permissible, the factual information re-
ported (as set forth in Appendix I) should
report the results upon initial review (i.e.,
not reflecting the results after curing) and
the curing process should not delay certi-
fication of internal controls or factual in-
formation required in Appendix I to this
Agreement. To the extent necessary, the
periodic review report should include the
dates on (or time period during) which
curative documentation was received for
accounts with respect to which the re-
viewer determined that underwithholding
had occurred, the number of accounts for
which curative documentation was ob-
tained and a revised calculation of the
underwithholding or additional backup
withholding.

(B) Periodic Review Report for
QDDs. If QI is acting as a QDD, the
periodic review report should also include
the number of accounts that were not cor-
rectly treated as (i) principal accounts (ex-
cept accounts that are effectively con-
nected with the conduct or a trade or

business within the United States within
the meaning of section 864), (ii) non-
principal accounts, (iii) principal accounts
that are effectively connected with the
conduct or a trade or business within the
United States within the meaning of sec-
tion 864, (iv) dealer accounts, and (v)
non-dealer accounts. The report should
also include any other issues related to the
QDD tax liability (e.g., incorrect determi-
nation of whether an account is a potential
section 871(m) transaction or a section
871(m) transaction, the dividend equiva-
lent payment amount, the qualifying div-
idend equivalent offsetting payment
amount, the amount of such payments
made or contractually obligated to be
made, or any other amounts subject to tax
(or required to compute the tax liability)
under section 871(a) and 881 (including
the QDD tax liability)).

(C) PAI Certification and Partner-
ship or Trust to which QI Applies the
Agency Option. Any PAI with which QI
has an agreement and any partnership or
trust to which QI applies the agency op-
tion that does not provide its documenta-
tion and other information to QI for inclu-
sion in QI's periodic review described in
section 10.04 of this Agreement, must
conduct an independent periodic review in
accordance with the compliance proce-
dures described in section 10.05 of this
Agreement. The performance results of
the periodic review must be documented
in a written report addressed to the re-
sponsible officer of QI and must be avail-
able to the IRS upon request (with a cer-
tified translation into English if the report
is not in English).

(D) Retention of Report and Certifi-
cations. The report and certifications de-
scribed in this section 10.06 must be re-
tained by QI (or the Compliance QI) for as
long as this Agreement is in effect.

### Sec. 10.07. Waiver of Periodic Review Requirement.

(A) In General. A QI that is not acting
as a QDD and that is an FFI that meets the
requirements of section 10.07(B) may ap-
ply for a waiver of the periodic review
requirement. QI must request a waiver of
the periodic review requirement under this
section 10.07 at the time the responsible
officer makes the periodic certification of
internal controls described in section

10.03 of this Agreement. QI's application
for such a waiver must be approved by the
IRS, and the waiver does not apply auto-
matically. QI must apply for a waiver for
each certification period for which a
waiver is requested. If QI's request for a
waiver of the periodic review requirement
is granted, such approval is only to waive
QI's obligations under sections 10.04 and
10.05 of this Agreement. The approval
does not relieve QI of making the certifi-
cation of internal controls described in
section 10.03 of this Agreement. The ap-
proval also does not preclude the IRS
from requesting information or conduct-
ing a correspondence review as described
in section 10.07 of this Agreement. QI
must include the information of any PAI
with which QI has an agreement and any
partnership or trust to which QI applies
the agency option in its waiver application
which is set forth in Part III of Appendix
I to this Agreement.

(B) Eligibility. QI is eligible to apply
for a waiver of the periodic review re-
quirement if it meets the following re-
quirements-

(1) QI must be an FFI that is not also
acting as a QDD;

(2) QI cannot be part of a consolidated
compliance program;

(3) For each calendar year covered by
the certification period, the reportable
amounts received by QI do not exceed $5
million;

(4) QI must have timely filed its Forms
1042, 1042-S, 945, 1099, and 8966, as
applicable, for all calendar years covered
by the certification period, including for
the year to which the periodic review
would be applied;

(5) QI must have made all periodic
certifications and reviews required by sec-
tions 10.02 and 10.03 of this Agreement
as well as all certifications required pur-
suant to QI's FATCA requirements as a
participating FFI, registered deemed-
compliant FFI, or registered deemed-
compliant Model 1 IGA FFI; and

(6) QI must have made the certification
of effective internal controls in section
10.02(A).

(C) Documentation Required with
Waiver Application. When applying for
a waiver under this section 10.07, QI must
include the information described in Ap-
pendix I to this Agreement using the most

recent calendar year covered by the certi-
fication period and reporting such results
as of QI's initial review (not following
any subsequent remediation).

(D) Approval. If QI's request for a
waiver of the periodic review requirement
is approved, the IRS will notify QI. If QI
requests a waiver but such request is not
approved, QI will be granted a six month
extension from the date of denial of the
waiver to complete the periodic review.
Such extension will not be granted if QI
has made the request for waiver in bad
faith.

Sec. 10.08. Periodic Review.

(A) In General. Based upon the certi-
fications made by the responsible officer
and the disclosure of material failures, the
information reported on Forms 945, 1042,
1042-S, 1099, and 8966 filed with the IRS
during the certification period, or other-
wise at the IRS's discretion for compli-
ance purposes, the IRS may initiate re-
quests of QI under this section 10.08. The
IRS may preemptively request remedia-
tion or the conduct of a limited periodic
review earlier than the time period pro-
vided in section 10.03 of this Agreement
if, based upon the information described
above, the IRS identifies, in its discretion,
a presence of factors indicating systemic
or significant compliance failures by QI.
The IRS may also request that QI desig-
nate a replacement responsible officer if
QI's responsible officer has not complied
with its responsibilities (including re-
sponding to requests by the IRS for addi-
tional information) or the IRS has infor-
mation that indicates the responsible
officer may not be relied upon to comply
with its responsibilities.

(B) Periodic Review Report. The IRS
may request, through written correspon-
dence to the responsible officer of QI (or
the Compliance QI), a copy of the results
of QI's periodic review for any prior cer-
tification period or the periodic review
report of any PAI or partnership or trust to
which QI applied the agency option that
QI has an agreement during the current
certification period (with a certified trans-
lation into English if the report is not in
English). QI is required to provide the
results within 30 calendar days of such
request.

(C) Correspondence Review. The
IRS may, in its discretion, conduct addi-
tional fact finding through a correspon-
dence review. In such a review, the IRS
will contact the responsible officer of QI
(or the Compliance QI) in writing and
request information about QI's compli-
ance with this Agreement or the compli-
ance of a PAI or a partnership or trust to
which QI applied the agency option, in-
cluding, for example, information about
documentation, withholding, or reporting
processes, its periodic review, and infor-
mation about any material failures that
were disclosed to the IRS (including re-
mediation plans). The IRS may request
phone or video interviews with employees
of QI (and the Compliance QI), PAI, or a
partnership or trust to which QI applied
the agency option as part of the IRS's
correspondence review. QI is required to
respond in a reasonable time to any such
requests.

(D) Additional Review Procedures.
In limited circumstances, the IRS may
direct QI (or the Compliance FFI) or any
PAI, partnership, or trust described in sec-
tion 4 of this Agreement with which QI
has an agreement to perform additional,
specified review procedures. The IRS re-
serves the right to require QI (or the Com-
pliance QI) or a PAI, or a partnership or
trust to which QI applied the agency op-
tion to engage an external reviewer to
perform the additional review procedures
regardless of whether such reviewer per-
formed the periodic review. The IRS will
provide the responsible officer of the QI
with a written plan describing the addi-
tional review procedures and will provide
a due date of not more than 120 days for
the QI to provide to the IRS a report
covering the reviewer's findings.

## SECTION 11. EXPIRATION, TERMINATION, MERGER AND DEFAULT

Sec. 11.01. Term of Agreement. This
Agreement begins on the effective date of
the QI Agreement and expires at the end
of the third full calendar year the Agree-
ment is in effect, unless terminated under
section 11.02 of this Agreement. This
Agreement may be renewed as provided
in section 11.08 of this Agreement.

Sec. 11.02. Termination of Agree-
ment. This Agreement may be terminated

by either the IRS or QI prior to the end of
its term by delivery of a notice, in accor-
dance with section 12.06 of this Agree-
ment, of termination to the other party.
The IRS, however, shall not terminate this
Agreement unless there has been a signif-
icant change in circumstances, as defined
in section 11.04 of this Agreement, or an
event of default has occurred, as defined
in section 11.06 of this Agreement, and
the IRS determines, in its sole discretion,
that the significant change in circum-
stances or the event of default warrants
termination of this Agreement. The IRS
shall not terminate this Agreement if QI
can establish to the satisfaction of the IRS
that all events of default for which it has
received notice have been cured within
the time period agreed upon. The IRS
shall notify QI, in accordance with section
11.06 of this Agreement, that an event of
default has occurred and that the IRS in-
tends to terminate the Agreement unless
QI cures the default or establishes that no
event of default occurred. A notice of
termination sent by either party shall take
effect on the date specified in the notice,
and QI is required to notify its withhold-
ing agent of the date that its status as a QI
is terminated.

The termination of the Agreement shall
not affect any of QI's reporting, tax filing,
withholding, depositing, or payment re-
sponsibilities arising in the calendar years
and portion of the calendar year in which
termination is requested and for which
this Agreement was in effect. The IRS
shall revoke QI's QI-EIN within a reason-
able time after the reporting, tax filing,
and depositing requirements for such
years are satisfied. The termination of this
Agreement is not intended to affect any
other federal income tax consequences.

Sec. 11.03. Loss of QDD Status. If QI
is acting as a QDD and fails to qualify as
an eligible entity during the term of this
Agreement, QI shall lose its QDD status
immediately upon QI failing to qualify as
an eligible entity and as of that date can no
longer act as a QDD. QI is required to
notify its withholding agent of the date
that it failed to qualify as an eligible entity
and no longer was permitted to act as a
QDD. QI's loss of QDD status shall not
affect any of QI's QDD reporting, tax
filing, withholding, depositing, or pay-
ment responsibilities for the period QI

was acting as a QDD as provided in this
Agreement, including paying its QDD tax
liability.

Sec. 11.04. Significant Change in
Circumstances. For purposes of this
Agreement, a significant change in cir-
cumstances includes, but is not limited
to-

(A) An acquisition of all, or substan-
tially all, of QI's assets in any transaction
in which QI is not the surviving legal
entity;

(B) A change in U.S. federal law or
policy, or applicable foreign law or pol-
icy, that affects the validity of any provi-
sion of this Agreement, materially affects
the procedures contained in this Agree-
ment, or affects QI's ability to perform its
obligations under this Agreement;

(D) A material change in the know-
your-customer rules and procedures set
forth in any Attachment to this Agree-
ment;

(E) A significant change in QI's busi-
ness practices that affects QI's ability to
meet its obligations under this Agreement;

(G) If QI is an FFI, QI fails to maintain
its status as a participating FFI, registered
deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI;

(H) If QI is an NFFE acting as a QI on
behalf of its shareholders, if it fails to
meet its requirements as a direct reporting
NFFE under § 1.1472-1(c)(3);

(I) If QI is acting as a sponsoring entity
on behalf of a sponsored FFI or sponsored
direct reporting NFFE, if it fails to comply
with the due diligence, withholding, re-
porting, and compliance requirements of a
sponsoring entity; or

(J) If QI is acting as a QDD, QI ceases
to qualify as an eligible entity, including
as a result of a change in its business or
regulatory status (see section 11.02).

Sec. 11.05. Merger. If QI merges with
or is acquired by another QI and the suc-
cessor QI assumes all the rights, debts,
and obligations of the predecessor QI as it
relates to such QI's QI agreement, the
predecessor or acquired QI must notify
the IRS that it intends to terminate this
Agreement prior to the end of its term by
delivery of a notice of termination and
merger, in accordance with section 12.06

of this Agreement. A notice of termination
and merger shall take effect on the date
specified in the notice, and QI is required
to notify its withholding agent of the date
that its status as a QI is terminated and
designate the successor QI to receive pay-
ments in its capacity as a QI for any
accounts previously covered by predeces-
sor QI's QI Agreement.

The successor QI must ensure that all
reporting and tax filing obligations are
fulfilled and any withholding is deposited,
in accordance with the procedures out-
lined in Rev. Proc. 99-50, 1999-2 C.B.
757, when applicable, that arose in the
calendar years and portion of the calendar
year in which termination is requested and
for which this Agreement was in effect
(including for Form 1042-S filed to report
withholding under chapter 4). To the ex-
tent QI is acting as a QDD, it must use the
standard procedure outlined in Rev. Proc.
99-50 and cannot use the alternative pro-
cedures. See QI's FATCA Requirements
as a participating FFI, registered deemed-
compliant FFI, or registered deemed-
compliant Model 1 IGA FFI for the pro-
cedures, if any, for reporting on Form
8966 in the case of a merger or acquisi-
tion. The IRS shall revoke QI's QI-EIN
within a reasonable time after once the
reporting, tax filing, and depositing re-
quirements for such years are satisfied.
The termination of this Agreement is not
intended to affect any other federal in-
come tax consequences

Sec. 11.06. Event of Default. For pur-
poses of this Agreement, an event of de-
fault occurs if QI fails to perform any
material duty or obligation required under
this Agreement and the responsible officer
had actual knowledge or should have
known of the facts relevant to the failure
to perform any material duty. An event of
default includes, but is not limited to, the
occurrence of any of the following:

(A) QI fails to implement adequate
procedures, accounting systems, and in-
ternal controls to ensure compliance with
this Agreement;

(B) QI underwithholds a material
amount of tax that QI is required to with-
hold under chapter 3 or 4 or backup with-
hold under section 3406 and fails to cor-
rect the underwithholding or to file an
amended Form 1042 or 945 reporting, and
paying, the appropriate tax;

(C) QI makes excessive refund claims;
(D) Documentation described in sec-
tion 5 of this Agreement is lacking, incor-
rect, or unreliable for a significant number
of direct account holders;

(E) QI files Forms 945, 1042, 1042-S,
1099, or 8966 that are materially incorrect
or fraudulent;

(F) If QI is an FFI, QI fails to materi-
ally comply with its FATCA requirements
as a participating FFI, registered deemed-
compliant FFI, or registered deemed-
compliant Model 1 IGA FFI;

(G) If QI is an NFFE acting as a QI on
behalf of its shareholders, QI fails to ma-
terially comply with its requirements as a
direct reporting NFFE under § 1.1472-
1(c)(3); or if QI is a sponsoring entity, QI
fails to materially comply with the due
diligence, withholding, reporting, and
compliance requirements of a sponsoring
entity;

(H) QI fails to materially comply with
the requirements of a nonqualified inter-
mediary under chapters 3 and 61, and
section 3406 with respect to any account
for which QI does not act as a QI.

(I) QI fails to perform a periodic re-
view when required or document the find-
ings of such review in a written report;

(J) QI fails to cooperate with the IRS
on its compliance review described in sec-
tion 10.08 of this Agreement;

(K) QI fails to inform the IRS of any
change in the know-your-customer rules
described in any Attachment to this
Agreement within 90 days of the change
becoming effective;

(L) QI fails to inform the IRS within 90
days of any significant change in its busi-
ness practices to the extent that change
affects QI's obligations under this Agree-
ment;

(M) QI fails to inform the IRS of any
PAI of QI, as described in section 4 of this
Agreement;

(N) QI fails to cure a material failure
identified in the qualified certification de-
scribed in section 10.03 of this Agreement
or identified by the IRS;

(O) QI makes any fraudulent statement
or a misrepresentation of material fact
with regard to this Agreement to the IRS,
a withholding agent, or QI's reviewer;

(P) The IRS determines that QI's re-
viewer is not sufficiently independent, as
described in this Agreement, to ade-

quately perform its review function, and
QI fails to arrange for a periodic review
conducted by a reviewer approved by the
IRS;

(Q) An intermediary with which QI
has a PAI agreement is in default with that
agreement and QI fails to terminate that
agreement within the time period speci-
fied in section 4.04 of this Agreement;

(R) A partnership or trust to which QI
applies the agency option is in default
with that agreement and QI fails to termi-
nate that agreement within the time period
specified in section 4.06 of this Agree-
ment; and

(S) If QI is acting as a QDD, QI fails to
timely pay a material amount of its QDD
tax liability and fails to correct the under-
payment and pay the appropriate tax
amount.

Sec. 11.07. Notice and Cure. Upon
the occurrence of an event of default, the
IRS will deliver to QI a notice of default
specifying each event of default. QI must
respond to the notice of default within 60
days (60-day response) from the date of
the notice of default. The 60-day response
shall contain an offer to cure the event of
default and the time period in which to
cure or shall state why QI believes that no
event of default occurred. If QI does not
provide a 60-day response, the IRS will
deliver a notice of termination as provided
in section 11.02 of this Agreement. If QI
provides a 60-day response, the IRS shall
either accept or reject QI's statement that
no default has occurred or QI's proposal
to cure the event of default. If the IRS
rejects QI's contention that no default has
occurred or rejects QI's proposal to cure
the event of default, the IRS may offer a
counter-proposal to cure the event of de-
fault with which QI will be required to
comply within 30 days. If QI fails to pro-
vide a 30-day response, the IRS will send
a notice of termination in accordance with
section 11.02 of this Agreement to QI,
which QI may appeal within 30 days of
the date of the notice by sending a written
appeal to the address specified in section
12.06 of this Agreement. If QI appeals the
notice of termination, this Agreement
shall not terminate until the appeal has
been decided. If an event of default is
discovered in the course of a review, the
QI may cure the default, without follow-
ing the procedures of this section 11.07, if

the external reviewer's report describes
the default and the actions that QI took to
cure the default and the IRS determines
that the cure procedures followed by QI
were sufficient. If the IRS determines that
QI's actions to cure the default were not
sufficient, the IRS shall issue a notice of
default and the procedures described in
this section 11.07 shall be followed.

Sec. 11.08. Renewal. If QI (including
a QI that is renewing its QDD status) is an
FFI, an NFFE acting on behalf of its
shareholders, or an NFFE that is a spon-
soring entity and intends to renew this
Agreement, it must submit a registration
for renewal to the IRS on the FATCA
registration website in accordance with
the instructions to Form 8957 or as other-
wise provided in published guidance. This
Agreement will be renewed only upon the
agreement of both QI and the IRS. A QI
that seeks to renew its QI agreement and
also seeks to become a QDD must supple-
ment the renewal request by providing a
statement containing all information re-
quired by Form 14345 relating to a QDD.

A QI not described in the preceding
paragraph must renew its QI agreement by
submitting a request for renewal to the
Foreign Intermediaries Program at the ad-
dress provided in section 12.06 of this
Agreement.

## SECTION 12. MISCELLANEOUS PROVISIONS

Sec. 12.01. QI's application to become
a qualified intermediary, all Appendices
and Attachments to this Agreement, and,
the following are hereby incorporated into
and made an integral part of this Agree-
ment:

(a) If QI is an FFI, its FATCA require-
ments as a participating FFI, registered

deemed-compliant FFI, or registered
deemed-compliant Model 1 IGA FFI; or
(b) If QI is an NFFE acting as a QI on
behalf of its shareholders, its requirements
as a direct reporting NFFE under
§ 1.1472-1(c)(3).

This Agreement, QI's application, and
the Appendices and Attachments to this
Agreement constitute the complete agree-
ment between the parties.

Sec. 12.02. This Agreement may be
amended by the IRS if the IRS determines
that such amendment is needed for the
sound administration of the internal reve-
nue laws or internal revenue regulations.
This Agreement will only be modified
through published guidance issued by the
IRS and U.S. Treasury Department. Any
such modification imposing additional re-
quirements will in no event become effec-
tive until the later of 90 days after the IRS
provides notice of such modification or
the beginning of the next calendar year
following the publication of such guid-
ance.

Sec. 12.03. Any waiver of a provision
of this Agreement is a waiver solely of
that provision. The waiver does not obli-
gate the IRS to waive other provisions of
this Agreement or the same provision at a
later date.

Sec. 12.04. This Agreement shall be
governed by the laws of the United States.
Any legal action brought under this
Agreement shall be brought only in a
United States court with jurisdiction to
hear and resolve matters under the internal
revenue laws of the United States. For this
purpose, QI agrees to submit to the juris-
diction of such United States court.

Sec. 12.05. QI's rights and responsibil-
ities under this Agreement cannot be as-
signed to another person.

Sec. 12.06. Except as otherwise pro-
vided in the instructions to Form 8957,
notices provided under this Agreement
shall be mailed registered, first class air-
mail. All notices sent to the IRS must
include the QI's name, QI-EIN, GIIN (if
applicable), and the name of its responsi-
ble officer. Such notices shall be directed
as follows:

To the IRS:

Internal Revenue Service
Foreign Payments Practice
Foreign Intermediaries Program
290 Broadway, 12th Floor NW
New York, New York 10007-1867
To the QI:

The QI's responsible officer. Such no-
tices shall be sent to the address indicated
in the QI's registration or application (as
may be amended).

Sec. 12.07. QI, acting in its capacity as
a qualified intermediary or in any other
capacity, does not act as an agent of the
IRS, nor does it have the authority to hold
itself out as an agent of the IRS.

## SECTION 5. EFFECTIVE DATE

The effective date of the QI agreement
contained in section 4 of this notice (as
modified and superseded by any future
published guidance) is January 1, 2017.

## SECTION 6. DRAFTING INFORMATION

The principal author of this notice is
Leni C. Perkins of the Office of Associate
Chief Counsel (International). For further
information regarding this notice contact
Ms. Perkins at (202) 317-6942 (not a toll
free call) or, with respect to QDDs, Peter
Merkel or Karen Walny at (202) 317-6938
(not a toll free call).

## APPENDIX I

General Instructions: QIs must provide the information and certifications described in this Appendix as applicable to their QI
status and activities. The following Parts must be completed by the specified QIs:

Part I: Part II:

All QIs.

Part III:

QIs eligible pursuant to section 10.07(A) and (B) of the QI Agreement to apply for a waiver of the periodic review requirement (as described in section 10.07 of the QI Agreement) and who wish to ap- ply for such a waiver. Under section 10.071(A) and (B) of the QI Agreement, the following QIs are not eligible for a waiver: (a) QIs that are NFFEs, (b) QIs that are acting as QDDs, and (c) QIs that are part of a consolidated compliance program.

Part IV.A:

All QIs that have not applied for or have not been approved for a waiver.

Part IV.B-F:

All QIs, excluding QIs that are only acting as QDDs and have no other QI activities, that have not ap- plied for or have not been approved for a waiver.

Part V:

All QIs that are acting as QDDs.

Part VI:

All QIs that assume primary withholding responsibility for payments of substitute interest.

A Compliance QI may complete Parts I and II for the QI members of its consolidated compliance group. However, the factual
information provided in Parts IV through VI must be completed separately for each QI member in the consolidated compliance
group.

## PART I. GENERAL INFORMATION

A. Did QI assume primary chapters 3 and 4 withholding responsibility for any calendar year covered by the certification period?
Y/N

B. Did QI assume primary Form 1099 reporting and backup withholding responsibility for any calendar year covered by the
certification period? Y/N

C. Is QI the Compliance QI for a consolidated compliance program? Y/N

1\. If yes, provide the names and QI-EINs of the members of the consolidated compliance group.

D. PAIs and partnerships and trusts to which QI applied the joint account or agency option during any time within the certification
period:

1\. The number of PAIs with whom QI has a PAI Agreement (if none enter 0).

a. Provide the names and addresses of those PAIS.

b. Each PAI has provided QI with a certification that it has maintained status as a certified deemed-compliant FFI (other
than a registered deemed-compliant Model 1 IGA FFI) for the certification period, as required under section 4.01 of the
QI Agreement. Y/N

c. Each PAI has provided QI with either (1) its information for inclusion in QI's periodic review (as described in section
4.01(F) of the QI Agreement) or (2) a periodic certification as described under section 10.03 of the QI Agreement and
a periodic review report as described under section 10.06 of the QI Agreement for the certification period. Y/N

2\. The number of partnerships or trusts to which QI applies the agency option (if none enter 0).

a. Provide the names and addresses of those partnerships or trusts.

b. Each partnership or trust to which QI applies the agency option has provided QI with a certification that it has maintained
status as a certified deemed-compliant FFI (other than a registered deemed-compliant Model 1 IGA FFI), an owner-
documented FFI with respect to QI, an NFFE, or an exempt beneficial owner, or that it is covered as an account that is
excluded from the definition of financial account under Annex II of an applicable IGA or under Treas. Reg. §
1.1471-5(a), as required under section 4.06(A)(2) of the QI Agreement. Y/N

c. Each partnership or trust to which QI applies the agency option pursuant to section 4.06 of the QI Agreement has
provided QI with either (1) its information for inclusion in QI's periodic review (as described in section 4.06(A)(5) of
the QI Agreement) or (2) a periodic certification required under section 10.03 of the QI Agreement and a periodic review
report as required under section 10.06 of the QI Agreement for the certification period. Y/N

3\. The number of partnerships or trusts to which QI applies the joint account option (if none enter 0).

a. Provide the names and addresses of those partnerships or trusts.

b. Each partnership or trust to which QI applies the joint account option has provided QI with a certification that it has
maintained status as a certified deemed-compliant FFI (other than a registered deemed-compliant Model 1 IGA FFI), an
owner-documented FFI with respect to QI, an exempt beneficial owner, or an NFFE or that it is covered as an account
that is excluded from the definition of financial account under Annex II of an applicable IGA or under Treas. Reg. §
1.1471-5(a), as required under section 4.05(A)(1) of the QI Agreement. Y/N

PART II: CERTIFICATION OF INTERNAL CONTROLS AND GENERAL INFORMATION -To be Completed by All QIs.
Complete Either A (Certification of Effective Internal Controls) or B (Qualified Certification).

### A. Certification of Effective Internal Controls

If the responsible officer has identified: (1) an event of default or (2) a material failure that QI has not corrected as of the date
of this certification (or such an event of default or material failure has otherwise been identified), QI cannot make the certification
of effective internal controls under this Part A and must make the qualified certification under Part B, below.

The responsible officer certifies to the following, check each statement to confirm:

1\. QI has established a compliance program that meets the requirements described in section 10.02(A) or 10.02(B) (if applicable)
of the QI Agreement that is in effect as of the date of the certification and during the certification period.

2\. Based on the information known (or information that reasonably should have been known) to the responsible officer, including
the findings of any procedure, process, or review undertaken in preparation for the responsible officer's certification of internal
controls, QI maintains effective internal controls over its documentation, withholding, and reporting obligations under the QI
Agreement and according to its applicable FATCA requirements, with respect to accounts for which it acts as a qualified
intermediary, and, if QI is acting as a QDD, it maintains effective internal controls over its computation and tax obligations
under the QI Agreement and the regulations under section 871(m).

3\. Based on the information known (or information that reasonably should have been known) to the responsible officer, including
the findings of any procedure, process, or review undertaken in preparation for the responsible officer's certification of internal
controls, there are no material failures, as defined in section 10.03(D) of the QI Agreement, or, if there are any material failures,
they have been corrected as of the date of this certification, and such failures are identified as part of this certification as well
as the actions taken to remediate them and to prevent their reoccurrence by the date of this certification. See Part II.D.3.A.

4\. With respect to any failure to withhold, deposit, or report to the extent required under the QI Agreement, or, with respect to
QI that is acting as a QDD, any failure to pay its QDD tax liability , QI has corrected such failure by paying any taxes due
(including interest and penalties) and filing the appropriate return (or amended return).

5\. All PAIs of QI and partnerships and trusts to which QI applies the agency option have either (a) provided (or will provide,
to the extent QI does not obtain a waiver under section 10.07 of the QI Agreement) documentation and other necessary
information for inclusion in the QI's periodic review or (b) provided the responsible officer of QI with a certification of
effective internal controls meeting the requirements of section 10.03(A) of the QI Agreement and have represented to QI that
there are no material failures, as defined in section 10.03(D) of the QI Agreement, or, if there are such failures, they have been
corrected as of the time of this certification, and the PAIs, partnerships, or trusts have disclosed any such failures to QI together
with the actions taken by the PAI, partnership, or trust to remediate such failures.

6\. QI's policies, procedures, and processes are applied consistently to all branches covered by the QI Agreement (except as
otherwise required by a jurisdiction's AML/KYC procedures, as applicable).

7\. If QI is acting as a QDD, it has acted as a QDD for all payments with respect to potential section 871(m) transactions and
underlying securities for which it is required to act as a QDD and no other transactions or underlying securities.

8\. If QI is acting as a QI and has assumed primary withholding responsibility with respect to payments of substitute interest (as
described in section 3.03(A) of the QI Agreement), QI has assumed primary withholding responsibility for all such payments
covered by the QI Agreement.

9\. A periodic review was conducted for the certification period in accordance with section 10.04 of the QI Agreement, and the
results of such review are reported to the extent required in sections 10.05 and 10.06 of the QI Agreement.

### B. Qualified Certification

If the responsible officer has identified an event of default or a material failure that QI has not corrected as of the date of this
certification, check the applicable statements to confirm:

1\. The responsible officer (or designee) has identified an event of default, as defined in section 11.06 of the QI Agreement, or
has determined that, as of the date of the certification, there are one or more material failures as defined in section 10.03(D)
of the QI Agreement with respect to QI's compliance, its PAI's compliance, or the compliance of a partnership or trust to which
QI applies the agency option and that appropriate actions will be taken to prevent such failures from reoccurring.

2\. With respect to any failure to withhold, deposit, or report to the extent required under the QI Agreement, or with respect to
QI that is acting as a QDD, a failure to pay its QDD tax liability, QI will correct such failure by paying any taxes due (including
interest and penalties) and filing the appropriate return (or amended return).

3\. The responsible officer (or an officer of the PAI or partnership or trust to which QI applies the agency option if the PAI or
partnership or trust performs its own periodic review) will respond to any notice of default (if applicable) or will provide (either
directly or through QI) to the IRS, to the extent requested, a description of each material failure and a written plan to correct
each such failure

### C. Amended Form 1042

1\. QI filed an amended Form 1042 to report additional tax liability based on the results of the periodic review or the findings of
any other procedure, process, or review undertaken by the responsible officer in preparation for his or her certification of
internal controls. Y/N

a. If Yes, QI used a projection method in determining the amount of the additional tax liability. Y/N
Note: If QI is acting as a QDD, it may not use a projection method in determining the amount of any additional QDD tax liability.

i. If Yes, QI used the safe harbor projection method under Appendix II to the QI Agreement. Y/N

ii. If No, describe the projection method used.

### D. Material Failures or Event of Default

Check the applicable statements to confirm. If QI is a compliance QI and identifies a material failure or event of default, it should
also indicate which QI in the consolidated compliance group is associated with the material failure or event of default.

1\. The responsible officer has determined that as of the date of the review, there are no material failures with respect to QI's
compliance with the QI Agreement.

2\. The responsible officer has determined that as of the date of the review, there are one or more material failures with respect
to QI's compliance with the QI Agreement and that appropriate actions have been or will be taken to prevent such failures from
reoccurring.

a. The following material failures were identified:

i. QI's establishment of, for financial statement purposes, a tax reserve or provision for a potential future tax liability
related to QI's failure to comply with the QI Agreement, including its FATCA requirements as a participating FFI,
registered deemed-compliant FFI, or registered deemed-compliant Model 1 IGA FFI, or, in the case of direct
reporting NFFE, its requirements under Treas. Reg. § 1.1472-1(c)(3), and with respect to QI that is acting as a
QDD, failure to satisfy its QDD tax liability and its obligations pursuant to section 871(m) and the regulations
under that section.

ii. QI's failure to establish written policies, procedures, or systems sufficient for the relevant personnel of QI to take actions
consistent with QI's obligations under the QI Agreement, including its FATCA requirements as a participating FFI,
registered deemed-compliant FFI, or registered deemed-compliant Model 1 IGA FFI, or, in the case of a direct reporting
NFFE, its requirements under Treas. Reg. § 1.1472-1(c)(3), or if QI is acting as a QDD, its obligations as a QDD under
the QI Agreement and pursuant to section 871(m) and the regulations under that section.

iii. A criminal or civil penalty or sanction imposed on QI (or any branch or office thereof) by a regulator or other
governmental authority or agency with oversight over QI's compliance with AML/KYC procedures to which QI (or any
branch or office thereof) is subject and that is imposed due to QI's failure to properly identify account holders under
the requirements of those procedures.

iv. A finding (including a finding noted in the periodic review report described in section 10.06 of the QI Agreement) that,
for one or more years covered by the QI Agreement, QI failed to:

1\. Withhold an amount that QI was required to withhold under chapter 3 or 4 or under section 3406 as required under
section 3 of the QI Agreement or, if QI is acting as a QDD, failing to timely pay its QDD tax liability;

2\. Provide information sufficient for another withholding agent to perform withholding and reporting to the extent
required when QI does not assume primary chapters 3 and 4 withholding responsibility or primary Form 1099
reporting and backup withholding responsibility;

3\. Provide allocation information as described in section 6.03(D) of the QI Agreement (regarding U.S. non-exempt
recipient account holders) by January 15, as required by that section when QI applies the alternative withholding rate
pool procedures;

4\. Make deposits in the time and manner required by section 3.08 of the QI Agreement or make adequate deposits to
satisfy its withholding obligations or, if QI is acting as a QDD, satisfy its QDD tax liability, taking into account the
procedures under section 9 of the QI Agreement

5\. Report or report accurately on Forms 1099 as required under section 8.06 of the QI Agreement or provide information
to the extent QI does not assume primary Form 1099 reporting and backup withholding responsibilities;

6\. Report or report accurately on Forms 1042 and 1042-S under sections 7 and 8 of the QI Agreement or, if QI
is acting as a QDD, obtain any necessary waiver from reporting or maintain the name, address, and TIN of a
significant number of U.S. non-exempt recipients to whom the QDD made a payment that otherwise would be
a qualifying dividend equivalent offsetting payment but for the limitation in section 2.70(B) of the QI
Agreement ; or

7\. Report or report accurately on Form 8966 under sections 8.04 and 8.05 of the QI Agreement.

v. Other (include a detailed explanation).

3\. The material failure identified in the review has been corrected by the time of this certification. Y/N/NA

a. If yes, describe the steps taken to correct the material failure.

b. If no, describe the proposed steps to be taken to correct the material failure and the time frame for completing such steps.

4\. Did any PAI of QI inform QI that it has had a material failure with respect to its agreement with QI? Y/N/NA

a. If yes, provide name of PAI and, based on the information provided by PAI, describe the steps taken to correct the material
failure or the proposed steps to be taken to correct the material failure and the timeframe for completing such steps.

5\. Did any partnerships or trusts to which QI applies the agency and/or joint account option inform QI that it has had a material
failure with respect to its obligations as described in the QI Agreement? Y/N/NA

a. If yes, provide name of the partnership or trust and, based on the information provided by the partnership or trust, describe
the steps taken to correct the material failure or the proposed steps to be taken to correct the material failure and the
timeframe for completing such steps.

6\. An event of default as defined in section 11.06 of the QI Agreement has been identified. Y/N

a. If yes, identify the event of default:

i. QI failed to implement adequate procedures, accounting systems, and internal controls to ensure compliance with
the QI Agreement;

ii. QI underwithheld a material amount of tax that QI was required to withhold under chapter 3 or 4 or backup withhold
under section 3406 and failed to correct the underwithholding or to file an amended Form 1042 or 945 reporting,
and paying, the appropriate tax;

iii. QI made excessive refund claims;

iv. Documentation described in section 5 of the QI Agreement was lacking, incorrect, or unreliable for a significant
number of direct account holders;

v. QI filed Forms 945, 1042, 1042-S, 1099, or 8966 that are materially incorrect or fraudulent;

vi. If QI is an FFI, QI failed to materially comply with its FATCA requirements as a participating FFI, registered
deemed-compliant FFI, or registered deemed-compliant Model 1 IGA FFI;

vii. If QI is an NFFE acting as a QI on behalf of its shareholders, QI failed to materially comply with its requirements
as a direct reporting NFFE under § 1.1472-1(c)(3); or if QI is a sponsoring entity, QI failed to materially comply
with the due diligence, withholding, reporting, and compliance requirements of a sponsoring entity;

viii. QI failed to materially comply with the requirements of a nonqualified intermediary under chapters 3 and 61, and
section 3406 with respect to any account for which QI does not act as a QI;

ix. QI failed to perform a periodic review when required or document the findings of such review in a written report;

x. QI failed to cooperate with the IRS on its compliance review described in section 10.08 of the QI Agreement;

xi. QI failed to inform the IRS of any change in the know-your-customer rules described in any Attachment to the QI
Agreement within 90 days of the change becoming effective;

xii. QI failed to inform the IRS within 90 days of any significant change in its business practices to the extent that change
affects QI's obligations under the QI Agreement;

xiii. QI failed to inform the IRS of any PAI of QI, as described in section 4 of the QI Agreement;

xiv. QI failed to cure a material failure identified in the qualified certification described in section 10.03 of the QI
Agreement or identified by the IRS;

xv. QI made any fraudulent statement or a misrepresentation of material fact with regard to the QI Agreement to the IRS,
a withholding agent, or QI's reviewer;

xvi. The IRS determined that QI's reviewer is not sufficiently independent, as described in the QI Agreement, to
adequately perform its review function, and QI failed to arrange for a periodic review conducted by a reviewer
approved by the IRS;

xvii. An intermediary with which QI has a PAI agreement was in default with that agreement and QI failed to terminate
that agreement within the time period specified in section 4.04 of the QI Agreement;

xviii. A partnership or trust to which QI applied the agency option was in default with that agreement and QI failed to
terminate that agreement within the time period specified in section 4.06 of the QI Agreement;

xix. If QI is acting as a QDD, QI failed to timely pay a material amount of its QDD tax liability and failed to correct the
underpayment and pay the appropriate tax amount; or

xx. Other (please describe).

### E. Significant Change in Circumstances

Check the applicable statements to confirm.

1\. For the most recent certification period, the periodic review has not identified any significant change in circumstances, as
described in section 11.04(A), (D), (E), or (J) of the QI Agreement.

2\. For the most recent certification period, the periodic review has identified the following significant change(s) in circumstances:

a. An acquisition of all, or substantially all, of QI's assets in any transaction in which QI is not the surviving legal entity.

b. A material change in the know-your-customer rules and procedures set forth in any attachment to the QI Agreement.

c. A significant change in QI's business practices that affects QI's ability to meet its obligations under the QI Agreement.

d. If QI is acting as a QDD, QI ceases to qualify as an eligible entity, including as a result of a change in its business or
regulatory status.

e. Other.

3\. Describe any significant changes in circumstances identified in Question 2 (and, if 2.d is selected, include the date on which
the QI ceased to qualify as an eligible entity).

### F. Chapter 4 Status

Complete the applicable section and check the applicable statement to confirm.

#### Participating FFIs

1\. For the most recent certification period under the QI Agreement, QI (or a branch of QI) has obtained status as a participating
FFI and made the following certification of compliance with respect to its FFI agreement for the most recent certification period
under the FFI agreement (check one). Note: You may only check N/A if, during the certification period, your chapter 4 status
changed from one of the other applicable chapter 4 statuses to participating FFI.

a. Certification of Effective Internal Controls

b. Qualified Certification

c. N/A

Registered Deemed-Compliant FFIs

1\. For the most recent certification period under the QI Agreement, QI certified as required under Treas. Reg. § 1.1471-
5(f)(1)(ii)(B) or Annex II of an applicable Model 2 IGA that it has satisfied the requirements for the deemed-compliant FFI
status claimed.

Registered Deemed-Compliant Model 1 IGA FFIs

1\. For the most recent certification period under the QI Agreement, QI (or a branch of QI) has been resident in or organized under
the laws of a jurisdiction that has in place a Model 1 IGA with the United States (or in the case of a branch of QI, the branch
operates in the jurisdiction) and has met the requirements under the IGA to be treated as a deemed-compliant FFI.

##### Direct Reporting NFFEs

1\. For the most recent certification period under the QI Agreement, QI has been a direct reporting NFFE and has met the
requirements of Treas. Reg. § 1.1472-1(c)(3).

## PART III. WAIVER OF PERIODIC REVIEW

For Parts B.1 through 6, while the curing of inadequate documentation is permissible, the information reported in this
section of the Appendix must be based on the initial review and not the results obtained after curing.

Note: In order to be eligible for a waiver, QI must be able to confirm all of the eligibility requirements in Part A are met.
For purposes of this Part, "account" means, unless otherwise specified, any account for which QI acts as a QI.

A. Eligibility for Waiver (check each statement to confirm)

1\. QI is an FFI that is not also acting as a QDD.

2\. QI is not part of a consolidated compliance program.

3\. For each calendar year covered by the certification period, the reportable amounts received by QI do not exceed $5 million.

4\. QI timely filed its Forms 1042, 1042-S, 945, 1099, and 8966 (as required for chapter 4 purposes or the reporting required under
an applicable IGA), as applicable, for all calendar years covered by the certification period.

5\. QI made all periodic certifications and reviews required by sections 10.02 and 10.03 of the QI Agreement as well as all
certifications required pursuant to QI's FATCA requirements as a participating FFI or registered deemed-compliant FFI.

6\. QI made the certification of internal controls in Part II.A.

B. Information required (provided for the most recent calendar year within the certification period)

1\. The total number of accounts

a. Total number of direct account holders

i. Foreign persons

ii. U.S. exempt recipients

iii. U.S. non-exempt recipients

iv. Intermediaries and flow-through entities

b. Total number of indirect account holders

i. Foreign persons

ii. U.S. exempt recipients

iii. U.S. non-exempt recipients

iv. Intermediaries and flow-through entities

2\. The total number of account holders that received reportable payments.

3\. The total number of account holders that received reportable amounts.

4\. The total number of such accounts that have valid documentation.

5\. The total number of accounts that have no documentation or invalid documentation.

6\. The total number of Forms 1042-S filed by QI.

7\. The aggregate amount of tax withheld under chapter 3 and chapter 4 (by QI or QI's withholding agent(s)).

8\. The total number of Forms 1099 filed by QI.

9\. The aggregate amount of backup withholding under section 3406 by QI or QI's payor(s).

PART IV. PERIODIC REVIEW: QI FACTUAL INFORMATION-To be Completed by All QIs that have not Applied for or
Obtained a Waiver. If QI acts solely as a QDD and has no other QI activities, QI is not required to complete Part IV.B
through F.

### A. General Information

1\. Did QI use an external reviewer to conduct any portion of its periodic review? Y/N

a. If yes, provide name(s) of reviewer(s).

2\. Did QI use an internal reviewer to conduct any portion of its periodic review? Y/N

a. If yes, provide a brief description of the internal reviewer, such as their department and other roles and responsibilities with
respect to the QI's QI activities.

3\. Calendar year reviewed for periodic review.

Caution: On the due date for reporting the factual information relating to the periodic review (provided in section 10.04 of the QI
Agreement), there must be 15 or more months available on the statutory period for assessment for taxes reportable on Form 1042
of the calendar year for which the review was conducted or the QI must submit, upon request by the IRS, a Form 872, Consent to
Extend the Time to Assess Tax, that will satisfy the 15-month requirement. The Form 872 must be submitted to the IRS at the address
provided in section 12.06 of the QI Agreement.

### B. General Information on Accounts and Review of Accounts

For Parts B through F, while the curing of inadequate documentation is permissible, unless otherwise indicated, the
information reported shall be based on the initial review and not the results obtained after curing. For purposes of this Part,
"account" means, unless otherwise specified, any account for which QI acts as a QI. However, do not include accounts for which
QI is acting as a QDD or accounts receiving substitute interest payments for which QI has assumed primary withholding
responsibility.

1\. Did QI assume primary chapters 3 and 4 withholding responsibility for any accounts for the calendar year provided in Question
3 in Part A, above? Y/N

2\. Did QI assume primary Form 1099 reporting and backup withholding responsibility for any accounts for the calendar year
provided in Question 3 in Part A, above? Y/N

3\. Total accounts reviewed for periodic review.

4\. Did QI use a statistical sampling method in conducting the review of its accounts? Y/N/NA

a. If yes, was it the safe harbor method under Appendix II to the QI Agreement?

b. If no, describe the method used.

5\. Total accounts reviewed that received reportable amounts.

6\. Total accounts reviewed that received withholdable payments that are not reportable amounts.

### C. Documentation

1\. Total accounts reviewed held by direct account holders.

2\. Total accounts reviewed held by indirect account holders.

3\. Total accounts reviewed with valid documentation.

4\. Total accounts reviewed with invalid documentation or no documentation.

5\. Total accounts reviewed with invalid documentation or no documentation for which valid documentation or additional valid
documentation was obtained after initial review.

6\. Total accounts reviewed for which treaty benefits were claimed.

7\. Total accounts reviewed for which treaty benefits were claimed where QI did not obtain sufficient documentation to establish
the payee's entitlement to treaty benefits (including, where applicable, the treaty statement and limitation on benefits
information required by section 5.03(B) of the QI Agreement).

8\. Total accounts reviewed held by U.S. non-exempt recipient account holders.

9\. Total accounts held by U.S. non-exempt recipient account holders reviewed for which QI has obtained a valid Form W-9.

10\. If QI has not assumed primary Form 1099 reporting and backup withholding responsibility, total accounts held by U.S.
non-exempt recipient account holders reviewed for which QI has transmitted Forms W-9 to a withholding agent.

11\. Total accounts reviewed assigned to chapter 3 or chapter 4 withholding rate pools.

12\. Total accounts reviewed assigned to chapter 3 or chapter 4 withholding rate pools where QI did not correctly report
withholding rate pool information to a withholding agent.

13\. Total accounts reviewed that are U.S. accounts (or U.S. reportable accounts under an applicable IGA) (if applicable) or, in
the case of an NFFE acting on behalf of its shareholders, held by substantial U.S. owners.

14\. Total accounts reviewed that are U.S. accounts (or U.S. reportable accounts under an applicable IGA) (if applicable) for which
QI has obtained a valid Form W-9 or, if applicable, self-certification.

15\. If QI is an NFFE acting as a qualified intermediary on behalf of persons other that its shareholders, total accounts reviewed
held by passive NFFEs with substantial U.S. owners.

### D. Withholding

1\. The aggregate amount reported as withheld under chapter 3 by QI on Forms 1042-S.

2\. Number of accounts for which amounts were withheld under chapter 3.

3\. The aggregate amount reported as withheld under chapter 4 by QI on Forms 1042-S.

4\. Number of accounts for which amounts were withheld under chapter 4.

5\. The aggregate amount reported as withheld by QI on Forms 1099.

6\. Number of accounts for which amounts were backup withheld under section 3406.

7\. Additional withholding required under chapter 4 based on results of periodic review.

8\. Additional withholding required under chapter 3 based on results of periodic review.

9\. Additional backup withholding required under section 3406 based on results of periodic review.

10\. The aggregate amount of deposits made in accordance with section 3.08 of the QI Agreement.

11\. Number of partnerships or trusts to which the joint account treatment of section 4.05 of the QI Agreement was applied (if
applicable).

a. Total accounts to which joint account treatment applied for which appropriate documentation was obtained and the
appropriate rate of withholding was applied.

b. Total accounts to which joint account treatment applied for which appropriate documentation was obtained and the
appropriate rate of withholding was not applied.

c. Total accounts to which joint account treatment applied for which appropriate documentation was not obtained and the
appropriate rate of withholding was not applied.

d. Aggregate amount of underwithholding resulting from the appropriate rate of withholding not being applied with respect
to an account to which the joint account treatment applied.

E. Reconciliation of Reporting on Payments of Reportable Amounts

1\. The aggregate amount reported paid to QI on all Forms 1042-S issued to QI.

2\. The aggregate amount reported paid to QI on the Forms 1099 issued to QI (unknown recipient).

3\. Total of Questions 1 and 2.

4\. The aggregate amount reported paid by QI on Forms 1042-S to QI's chapter 4 reporting pools (other than the U.S. payee pool)
(including a chapter 4 reporting pool of a PAI or a partnership or trust to which QI applies the agency option).

5\. The aggregate amount reported paid by QI on Forms 1042-S to QI's chapter 4 reporting pool- U.S. payee pool.

6\. The aggregate amount reported paid by QI on Forms 1042-S to QI's chapter 3 reporting pools (including chapter 3 reporting
pools of a PAI or partnership or trust to which QI applies the joint account or agency option).

7\. The aggregate amount reported paid by QI on Forms 1042-S to other QIs (excluding QIs that are acting as QDDs) and WPs
and WTs as a class.

8\. The aggregate amount reported paid by QI on Forms 1042-S to QIs that are acting as QDDs.

9\. The aggregate amount reported paid by QI on Forms 1042-S to participating FFIs, registered deemed-compliant FFIs, and
registered deemed-compliant Model 1 IGA FFIs that are intermediaries or flow-through entities as a class and with respect
to their chapter 4 reporting pools.

10\. The aggregate amount reported paid by QI on Forms 1042-S to indirect account holders (not included in Question 9 above
and including an account holder of an intermediary or flow through entity reported by QI as made to an unknown recipient
on Form 1042-S).

11\. The aggregate amount paid by QI to U.S. non-exempt recipients as a class not includable in a chapter 4 withholding rate pool
of QI.

12\. The aggregate amount paid by QI to U.S. exempt recipients as a class not includable in a chapter 4 withholding rate pool of
QI.

13\. Total of questions 4 through 12

14\. The amount of any unreconciled variances (if Question 3 minus Question 13 is other than 0)

15\. The aggregate amount paid by QI to its direct account holders (including account holders of any PAI or partner, beneficiary,
or owner of a partnership or trust to which QI applies the joint account or agency option) that requested individual Form(s)
1042-S.

#### F. Reconciliation of Withholding on Reportable Amounts

1\. The aggregate amount reported as withheld by another withholding agent on Forms 1042-S issued to QI.

2\. The aggregate amount reported as backup withheld by another withholding agent on Forms 1099 issued to QI (unknown
recipient).

3\. The aggregate amount reported by QI as amounts it withheld on Forms 1042-S.

4\. The aggregate amount reported by QI as amounts it backup withheld on Forms 1099.

5\. If QI did not assume primary withholding responsibility and amounts are entered for questions 3 or 4, explain any
underwithholding that occurred by the withholding agent.

6\. If QI assumed primary withholding responsibility and amounts are entered for questions 1 or 2, explain the amount withheld
by others.

7\. The aggregate amount of any collective claims for refund or credit made by QI.

### Part V. Qualified Derivatives Dealers

Complete only if QI is acting as a QDD and only for accounts for which QI is acting in its QDD capacity. See section 2.01 of
the QI Agreement for the definition of "account" with respect to QI acting as a QDD. If QI is acting as a QDD and is a foreign branch
of a U.S. financial institution, it is not required to complete questions in this Part relating to the QDD tax liability (Parts A.3, A.5,
and D).

#### A. General Information-Check to Confirm

1\. QI has established procedures to ensure that it is acting as a QDD for all payments received by QI with respect to potential
section 871(m) transactions and underlying securities when acting as a principal and for all payments made by QI with respect
to potential section 871(m) transactions when acting as a principal, except payments specifically excluded from QDD activities
in the QI Agreement, and that it is not acting as a QDD for any other payments.

2\. QI has established procedures to determine whether a payment is a dividend equivalent payment and the amount of the dividend
equivalent, including taking into account information received pursuant to Treas. Reg. § 1.871-15(p), where appropriate.

3\. QI has established procedures to determine its QDD tax liability, including whether a transaction is a dealer or non-dealer
transaction.

4\. QI has properly filed Form 1042 (including all information required to be reported by a QDD).

5\. QI has satisfied its QDD tax liability.

6\. Did QI use a statistical sampling method in conducting the review of its accounts for which QI acted as a QDD? Y/N/NA
a. If yes, was it the safe harbor method under Appendix II to the QI Agreement?

b. If no, describe the method used.

7\. Total number of accounts for which QI acted as a QDD.

8\. Total number of accounts for which QI acted as a QDD reviewed as part of the periodic review.

#### B. Documentation

1\. Total accounts reviewed with valid documentation.

2\. Total accounts reviewed with invalid documentation or no documentation.

3\. Total accounts reviewed with invalid documentation or no documentation for which valid documentation or additional valid
documentation was obtained after the initial review.

4\. Total accounts reviewed for which treaty benefits were claimed.

5\. Total accounts reviewed for which treaty benefits were claimed where QI did not obtain sufficient documentation to establish
the payee's entitlement to treaty benefits (including, where applicable, the treaty statement and limitation on benefits
information required by section 5.03(B) of the QI Agreement).

6\. Total accounts reviewed held by U.S. non-exempt recipient account holders.

7\. Total accounts held by U.S. non-exempt recipient account holders reviewed for which QI has obtained a valid Form W-9.

#### C. Withholding

1\. The aggregate amount reported as withheld under chapter 3 by QI on Forms 1042-S for payments with respect to potential
section 871(m) transactions it made when acting as a QDD.

2\. Number of accounts for which amounts were withheld under chapter 3 for payments with respect to potential section 871(m)
transactions it made when acting as a QDD.

3\. The aggregate amount reported as withheld under chapter 4 by QI on Forms 1042-S for payments with respect to potential
section 871(m) transactions it made when acting as a QDD.

4\. Number of accounts for which amounts were withheld under chapter 4 for payments with respect to potential section 871(m)
transactions it made when acting as a QDD.

5\. Aggregate amount reported as withheld on Forms 1099 for payments with respect to potential section 871(m) transactions made
to U.S. persons.

6\. Number of accounts for which amounts were backup withheld under section 3406 for payments with respect to potential section
871(m) transaction made to U.S. persons.

7\. Additional withholding required under chapter 4 based on results of periodic review.

8\. Additional withholding required under chapter 3 based on results of periodic review.

9\. Additional backup withholding required based on results of periodic review.

10\. The aggregate amount of deposits made in accordance with section 3.08 of the QI Agreement with respect to payments made
when acting as a QDD.

#### D. Reconciliation of QDD Tax Liability

1\. Total amount of dividend and dividend equivalent payments received in a dealer capacity.

2\. Total amount of dividend equivalent payments made by QI acting as a QDD in its dealer capacity.

3\. Total amount of qualifying dividend equivalent offsetting payments made by QI acting as a QDD in its dealer capacity.

4\. Total amount of dividend equivalent payments or qualifying dividend equivalent offsetting payments made or contractually
obligated to be made by QI acting as a QDD in its dealer capacity.

5\. Total amount of dividend and dividend equivalent payments received by QI acting as a QDD in its non-dealer capacity.

6\. Total amount of dividend equivalent payments made by QI acting as a QDD in its non-dealer capacity.

7\. Total section 871(m) amount (difference between line 1 and the sum of lines 2-4).

8\. Total amount of payments with respect to potential 871(m) transactions and underlying securities received as a principal.

9\. Total amount of other payments received with respect to potential section 871(m) transactions and underlying securities as a
principal that are not dividend or dividend equivalent payments received in a dealer capacity (difference between line 8 and
line 1)

#### E. Reporting

1\. Total amount of dividend equivalent payments reported on Form 1042-S.

2\. Total amount of payments that are not dividend equivalent payments reported on Form 1042-S.

3\. Total amount of payments of qualifying dividend equivalent offsetting payments made to U.S. persons, as described in section
2.70(A)(1) of the QI Agreement, reported in a pool on Form 1042-S.

4\. Total amount of payments of qualifying dividend equivalent offsetting payments that are effectively connected with the conduct
of a trade or business in the United States, as described in section 2.70(A)(2) of the QI Agreement, reported in a pool on Form
1042-S.

5\. Total amount of payments of amounts that otherwise would be qualifying dividend equivalent offsetting payments but for the
limitation in section 2.70(B) of the QI Agreement.

6\. Total amount of payments reported on Form 1099.

7\. Aggregate amount of any claims for credit or refund made by QI acting as a QDD with respect to payments with respect to
potential section 871(m) transactions.

## Part VI. Substitute Interest

Complete only if a qualified intermediary that has assumed primary withholding responsibility for payments of substitute interest
(as described in section 3.03(A) of the QI Agreement).

### A. General Information

1\. Total number of accounts receiving substitute interest payments.

2\. Total number of accounts receiving substitute interest reviewed as part of the periodic review.

3\. Did QI use a statistical sampling method in conducting the review of substitute interest transactions for which QI assume
primary withholding responsibility? Y/N/NA

a. If yes, was it the safe harbor method under Appendix II to the QI Agreement?

b. If no, describe the method used.

### B. Documentation

1\. Total accounts reviewed with valid documentation.

2\. Total accounts reviewed with invalid documentation or no documentation for which documentation or additional documen-
tation was obtained after the initial review.

3\. Total accounts reviewed for which treaty benefits were claimed.

4\. Total accounts reviewed for which treaty benefits were claimed where QI did not obtain sufficient documentation to establish
the payee's entitlement to treaty benefits (including, where applicable, the treaty statement and limitation on benefits
information required by section 5.03(B) of the QI Agreement).

5\. Total accounts reviewed held by U.S. non-exempt recipient account holders.

6\. Total accounts held by U.S. non-exempt recipient account holders reviewed for which QI has obtained a valid Form W-9.

### C. Withholding

1\. The aggregate amount reported as withheld under chapter 3 by QI on Forms 1042-S with respect to substitute interest payments.

2\. Number of accounts for which amounts were withheld under chapter 3 with respect to substitute interest payments.

3\. The aggregate amount reported as withheld under chapter 4 by QI on Forms 1042-S with respect to substitute interest payments.

4\. Number of accounts for which amounts were withheld under chapter 4 with respect to substitute interest payments.

5\. Additional withholding required under chapter 4 based on results of periodic review.

6\. Additional withholding required under chapter 3 based on results of periodic review.

7\. Aggregate amount reported as withheld on Forms 1099 on reportable payments (including reportable amounts) subject to
backup withholding.

8\. Additional backup withholding required based on results of periodic review.

9\. The aggregate amount of deposits made in accordance with section 3.08 of the QI Agreement with respect to substitute interest
payments.

### D. Reporting

1\. Total amount of interest or substitute interest payments received for which QI represented itself as assuming primary
withholding responsibility.

2\. Aggregate amount of substitute interest payments made.

3\. Total amount of payments in Question 2 that were reported on Forms 1099.

4\. Total amount of payments in Question 2 that were amounts subject to chapter 4 reporting reported on Form 1042-S.

5\. Total amount of payments in Question 2 that were amounts subject to chapter 3 reporting reported on Form 1042-S.

6\. Aggregate amount of any claims for credit or refund made by QI with respect to payments of substitute interest.

# APPENDIX II

Section 1. Background. As provided in section 10.05 of the QI Agreement, the reviewer is permitted to use a sampling
methodology to perform the periodic review. This Appendix includes safe harbor procedures covering basic sample design
parameters and methodologies, including sample size, strata allocation, and projection. QI may use another sampling technique
provided it documents its parameters and methodologies for the IRS to review, as described in section 10.05 of the QI Agreement.
Sampling should only be used whenever an examination of all accounts within a particular class of accounts would be prohibitive
in terms of time and expense. If it is reasonable to examine all accounts in connection with a particular part of the periodic review,
sampling techniques should not be used. Except as otherwise provided herein, the terms used in this Appendix are as defined in
section 2 of the QI Agreement.

Generally, sampling should only be used if there are more than 50 accounts to review. To the extent applicable, the reviewer must
separately review accounts for which QI acts as a qualified intermediary (excluding accounts for which QI is acting as a QDD and
accounts to which QI made substitute interest payments for which QI assumed primary withholding responsibility) ("QI accounts"),
accounts for which QI is acting as a QDD, and accounts receiving substitute interest payments for which QI assumed primary
withholding responsibility. If PAI accounts are also included in the QI's review (because the PAI did not perform its own compliance
review), the PAI accounts should be included in the sample of QI accounts by adding additional strata, replicating the strata
prescribed in section 2.C of this Appendix as applicable, that contain only PAI accounts. For purposes of the QI's periodic review,
a QI account, an account for which QI is acting as a QDD, or an account receiving substitute interest payments for which QI assumed
primary withholding responsibility is referred to as a "sample unit" (and collectively as the "sample") with respect to each review.
For any of the three reviews with populations containing 50 or fewer sample units, all sample units for that population must be
reviewed.

The statistical sampling methodologies used in this Appendix are not intended to be and cannot be used for any other tax purpose.
A reviewer may request approval to modify the safe harbor or approval of another sampling methodology in order to select more
than the three sample units or to use multistage, cluster, or other sampling methodologies including additional stratifications. To
obtain IRS approval, contact the Financial Intermediaries Program in accordance with section 12.06 of the QI Agreement.

## Section 2. Safe Harbor Methodology.

### A. Populations.

The population of the first sample must consist of QI accounts, taking into account each of the strata described in section 2.C(a)
of this Appendix. If QI acts as a QDD, the population of the second sample must consist of accounts for which QI is acting as a QDD,
taking into account each of the strata described in section 2.C(b) of this Appendix. If QI assumes primary withholding responsibility
for substitute interest payments, the population of the third sample must consist of accounts receiving such substitute interest
payments, taking into account each of the strata described in section 2.C(c) of this Appendix.

(a) Sample of QI Accounts. The reviewer selects a random sample of accounts from a portion of the population of all QI accounts.
The portion of the population will consist of (1) all accounts held by U.S. persons (or account holders presumed to be U.S. persons)
that received a reportable payment and (2) all accounts held by non-U.S. persons (or account holders presumed to be non-U.S.
persons) that received a reportable amount. If QI is acting as a QDD, accounts for which QI is acting as a QDD are not to be
considered in determining the population for this sample. If QI assumes primary withholding responsibility for substitute interest
payments, accounts receiving such substitute interest payments are also not are to be considered in determining the population for
this sample.

(b) Sample of QDD Accounts. The reviewer selects a random sample of accounts from the population consisting of accounts for
which QI is acting as a QDD.

(c) Sample of Accounts Receiving Substitute Interest Payments. The reviewer selects a random sample of accounts from the
population consisting of accounts receiving substitute interest payments for which QI assumes primary withholding responsibility.

### B. Sample Sizes.

(a) The sample sizes for each of the three samples are calculated independently. If PAI accounts have been added to the sample
of QI accounts because the PAI did not perform its own periodic review, a separate sample size calculation should also be performed
for the PAI accounts as if they were part of a separate sample. The sample size for each of the three samples, and for any additional
PAI accounts, is the lesser of (i) the number of sample units determined using the sample formula in paragraph (c) of this section,
or (ii) 25 percent of the total number of sample units in the population. However, in determining the sample size, the reviewer must
adhere to the guidelines for minimum stratum sample sizes in sections 2.C and 2.D of this Appendix. This may result in a sample
size greater than the maximum sample size resulting from using the formula in paragraphs (b) and (c) of this section. The minimum
sample size of any sample shall not be less than 50.

(b) Sample Size Adjustments. The variable P "error rate" should be set equal to (1) 5 percent for the sample of QI accounts, resulting
in a maximum sample size of 321; (2) 4 percent for the sample of QDD accounts, resulting in a maximum sample size of 259; and (3) 1.5
percent for the sample of accounts receiving substitute interest payments, resulting in a maximum sample size of 100.

t2 PQ d2

Sample Size =

1+1 (t2 PQ _1) N d2

where t= 1.645 (confidence coefficient at 95 percent one-sided)

P= 5 percent (error rate) for the QI account sample, 4 percent for the QDD sample, and 1.5 percent for the substitute interest
sample.

Q= 1-P
d = 2 percent (precision level)
N= total population

### C. Strata.

(a) Sample of QI Accounts. The reviewer must segregate all of the QI accounts into the following strata. If QI makes payments
to a single account that result in the account meeting the qualifications for more than one stratum, the account should be treated as
multiple accounts, with each newly redefined account consisting of the payments received for each relevant stratum. Further
substratification by dollar amounts may be used in accordance with section 2.H of this Appendix.

(1) A stratum of accounts held by recalcitrant account holders and non-participating FFI account holders.

(2) A stratum of accounts not included in the previously defined stratum of nonwithholding foreign partnerships and nonwith-
holding foreign trusts to which the QI applied the joint account option or the agency option.

(3) A stratum of all accounts held by direct account holders that are not U.S. non-exempt recipients and are not included in any
previously defined strata.

(4) A stratum of all accounts that are held by direct account holders that are U.S. non-exempt recipients that are not included in
any of the previously defined strata.

(5) A stratum of all accounts held by indirect account holders not included in any previously defined strata.

(b) Sample of QDD Accounts. The reviewer must segregate all of the accounts for which QI is acting as a QDD into the following strata:

(1) A stratum of all accounts where the QDD makes or is contractually obligated to make a dividend equivalent payment to
recalcitrant account holders and non-participating FFIs.

(2) A stratum of all accounts where the QDD makes or is contractually obligated to make a dividend equivalent payment to foreign
recipients that are not included in the previously defined stratum.

(3) A stratum of all accounts where the QDD makes or is contractually obligated to make a payment of a qualifying dividend
equivalent offsetting payment that are not included in any of the previously defined strata.

(4) A stratum of all accounts where the QDD makes reportable payments with respect to potential section 871(m) transactions
that are not dividend equivalents to foreign recipients that are recalcitrant account holders and non-participating FFIs.

(5) A stratum of all accounts where the QDD makes reportable payments to foreign recipients with respect to potential section

871(m) transactions that are not dividend equivalents that are not included in any of the previously defined strata.

(6) A stratum of all accounts where the QDD makes payments to U.S. persons with respect to potential section 871(m) transactions that
are not qualifying dividend equivalent offsetting payments and that are not included not included in any of the previously defined strata.

(7) A stratum of all accounts not included in any of the previously defined strata.

(c) Sample of Accounts Receiving Payments of Substitute Interest. The reviewer must segregate all of the accounts receiving
payments of substitute interest for which QI has assumed primary withholding responsibility into the following strata:

(1) A stratum of accounts held by recalcitrant account holders and non-participating FFI account holders.

(2) A stratum of all accounts held by account holders that are not U.S. non-exempt recipients and are not included in the previously
defined stratum.

(3) A stratum of all accounts held by account holders that are U.S. non-exempt recipients and are not included in any of the
previously defined strata.

D. Allocation of Sample Size to Each Stratum.

The reviewer must allocate the number of sample units for each sample, and for any PAI accounts added to the sample of QI
accounts, independently of the other samples. For example, the reviewer must allocate the number of sample units in the sample

determined under section 2.B of this Appendix to each stratum described in section 2.C(a) by multiplying the number of sample units
in the sample, as determined under section 2.B, by a fraction, the numerator of which is the total number of sample units in the
stratum and the denominator of which is the total number of sample units in the population. The same allocation should also be made
for each stratum described in sections 2.C(b) and (c) of this Appendix, respectively. The minimum allocation to each stratum is the lesser
of (1) 50 sample units or (2) the total number of sample units in the stratum. If there are fewer than 50 sample units in any stratum, all
sample units in that stratum must be examined, and the difference between 50 and the number of sample units in the stratum must be
reallocated to the remaining strata on a pro rata basis. If there are 50 or more sample units in the stratum, but the allocation, as determined
under the fraction above, is less than 50 sample units, the number of sample units to be used in the sample from that stratum is 50.

E. Number Generator. The reviewer must select for review sample units from each stratum identified in section 2.C for each of
the (a) sample of QI accounts; (b) sample of accounts for which QI is acting as a QDD; and (c) sample of accounts receiving
substitute interest payments for which QI assumes primary withholding responsibility by using a random number generator. Random
numbers should be drawn separately for each sample including the use of separate seeds. Information regarding the random number
generator used must be included in the records required in section 3.E of this Appendix. This information must be sufficient to allow
the IRS to replicate the random numbers. This information must include the name and version of the random number generator, the
seed numbers used or generated, specification of any options selected, and the computer equipment on which it was run.

G. Selection of Accounts for Review. For purposes of reviewing and testing accounts in accordance with section 10.05 of the QI
Agreement, the reviewer must review accounts from every stratum in all three applicable samples that meet the requirements for the
review, taking into account the applicable presumption rules where documentation is missing, invalid, or cannot be relied upon (and
any reclassification after applying the presumption rules).

To the extent the number of sample units listed above from the sample (or in the population, if the reviewer has not used statistical
sampling) in any stratum is less than 20, the reviewer must also select for review (in the order selected by the random number
generator under section 2.E of this Appendix or, if the reviewer has not used statistical sampling, in the order used by the QI for its
record keeping) an additional number of sample units drawn from that stratum that equal the difference between 20 and the number
of sample units from the sample in that stratum.

H. Optional Further Stratification by Dollar Amounts. For any of the three samples, the reviewer may further stratify by dollar
amounts for that sample without submitting a request for approval when the reviewer is otherwise selecting the sample in accordance with
this Appendix. For the QI account sample, reportable amounts for foreign recipients and reportable payments for U.S. recipients are to be
considered in the substratification. If the reviewer chooses to substratify under this section, the reviewer must comply with the following rules:

(a) The strata consisting of sample units that have received payments of the highest dollar amounts during the audit year shall not
consist of more than 25 accounts. All items in these strata shall be reviewed.

(b) The remaining strata shall be randomly selected to contain approximately equal amounts in each substratum.

#### I. Determining Rate of Withholding for Partnerships and Trusts for Which the QI has Utilized Joint Account Treatment

When reviewing documentation of partners, beneficiaries, or owners to determine the rate of withholding QI should have applied to a
partnership or trust, the reviewer may limit the review to the number of partners, beneficiaries, or owners by referring to the table below.

Number of partners, beneficiaries, or owners

Number to be reviewed

0 - 10

all

11 - 14

15 - 19

20 - 24

25 - 29

30 - 34

35 - 39

40 - 49

50 - 74

75 - 99

100 - 199

200 - 499

500 - 4,999

&gt; 4,999

##### Section 3. Additional Requirements Regarding the Use of Sampling

A. Reporting of Sample Plan for Samples not Utilizing the Safe Harbor.

When not utilizing the safe harbor statistical sampling plan in this Appendix, the reviewer should provide in its periodic review
report a description of the sampling methodology used. If the reviewer used a statistical sampling plan other than the safe harbor
statistical sampling plan described in this Appendix, the reviewer should provide the information described in Rev. Proc 2011-42
Appendix A) Sampling Plan Standards and Appendix B) Sampling Documentation Standards for Sample Execution Documentation,
in addition to any information required by this Appendix.

B. Determination of Underwithholding. If the reviewer determines that underwithholding has occurred with respect to the sampled
accounts, QI shall report and pay, in accordance with the requirements of the QI Agreement, the underwithheld tax determined under
the IRS projection method described in section 3.D. The QI will also notify the IRS Financial Intermediaries Program at the address
provided in section 12.06 of the QI Agreement of any underwithholding discovered as a result of the review. Alternatively, the QI
can propose to the IRS another amount of underwithholding based on section 3.B of this Appendix. For this purpose, QI agrees to
provide the IRS with the information (e.g., number of accounts, associated amounts, stratum locations of adjusted items, etc.)
required to project the underwithholding. If the IRS does not agree with the amount proposed by QI, the IRS shall assess a tax under
the procedures set forth in the Code.

C. QDD Tax Liability. If the reviewer determines that QI acting as a QDD has not fully satisfied its QDD tax liability (as described
in section 3.09 of the QI Agreement), QI must report and pay the amount owed in accordance with the requirements of the QI
Agreement. A QI acting as a QDD may not use a projection method to determine the amount of underpayment of its QDD tax
liability.

D. Projection. If the reviewer has determined that underwithholding has occurred with respect to the sample, based on the original
assessment of the reviewer without regard to any remediation or curing after the selection of the sample units for review, then the
reviewer will determine the total amount of underwithheld tax by utilizing a projection method, except as provided in section 3.C
of this Appendix. If the reviewer is using a method other than the safe harbor statistical sampling plan described in this Appendix,
QI shall contact the Financial Intermediaries Team to agree to a projection method. If the review is using the safe harbor statistical
sampling plan, then the reviewer may determine the amount of underwithheld tax by projecting the underwithholding over the entire
stratum of similar sampling units using the following method:

(a) Divide the amount of underwithholding for the stratum (as originally determined by the reviewer without regard to any
remediation or curing after the reviewer selected the sample units to be reviewed) by the number of sampling units in the sample;

(b) Multiply the result in (a) by the total number of sampling units in the stratum; and

(d) Total all amounts for (c) for all strata.

If the reviewer has determined that overwithholding has occurred with respect to the sample, the reviewer may not project the
amount of overwithholding in order to claim a refund. The reviewer may offset any underwithholding against any overwithholding
in the sample, provided that QI enters into a closing agreement (Form 906) that QI will not file a claim for refund for any
overwithholding that the reviewer has discovered.

If after reviewing the periodic review report, the IRS determines that further action is necessary with respect to underwithholding,
the IRS may request that QI have the reviewer conduct a full review of the entire sample or may determine that it is not appropriate
to project an amount of underwithholding. In making such determination, the IRS will consider whether: (1) the amount is the
consequence of an identified error; (2) the error was not repeated throughout the population over which it would be projected; (3)
QI has corrected the error; (4) QI has established safeguards to prevent reoccurrence of the error; and (5) facts as corrected show
that there was actually no underwithholding during the compliance period.

The QI may also propose an alternative projected underwithholding tax adjustment based on facts and circumstances.

E. Reporting of Sample Results. At a minimum, the reviewer should note the following separately for each sample by stratum in
its periodic review report:

(1) The steps taken to construct the sample population and the steps taken to ensure all accounts subject to review were included
in the populations of accounts and subject to sampling under the procedures outlined in this Appendix;

(2) Original population and sample statistics as follows:

(1) Total number of sample units in the population;

(2) Total number of sample units in the sample;

(3) Total reportable amounts for foreign recipients for the population;

(4) Total reportable payments for U.S. recipients for the population;

(5) Total reportable amounts for foreign recipients for the sample;

(6) Total reportable payments for U.S. recipients for the sample;

(7) Total chapter 3 withholding for the population;

(8) Total backup withholding for the population;

(9) Total chapter 4 withholding for the population;

(10) Total chapter 3 withholding for the sample;

(11) Total backup withholding for the sample; and

(12) Total chapter 4 withholding for the sample.

Additionally, the reviewer should note a reconciliation of amounts included in the sample population to payments and
withholdings of reportable amounts as detailed in Part IV sections E (Reconciliations of Reporting on Payments of Reportable
Amounts) and F (Reconciliation of Withholding on Reportable Amounts) of Appendix I to the QI Agreement.

# 2015 Section 45K(d)(2)(C) Reference Price Notice 2016-43

## SECTION 1. PURPOSE

This notice publishes the reference
price under § 45K(d)(2)(C) of the Internal
Revenue Code for calendar year 2015.
The credit period for the nonconventional
source production credit under § 45K
ended on December 31, 2013, for facili-
ties producing coke or coke gas (other
than from petroleum based products).
However, the reference price continues to
apply in determining the amount of the
enhanced oil recovery credit under § 43,
the marginal well production credit under
§ 45I, and the percentage depletion in case
of oil and natural gas produced from mar-
ginal properties under § 613A.

## SECTION 2. BACKGROUND

Section 45K(d)(2)(C) provides that the
term "reference price" means, with re-
spect to a calendar year, the Secretary's
estimate of the annual average wellhead
price per barrel for all domestic crude oil
the price of which is not subject to regu-
lation by the United States.

Section 43(a) provides that, for pur-
poses of § 38, the enhanced oil recovery
credit for any taxable year is an amount
equal to 15 percent of the taxpayer's qual-
ified enhanced oil recovery costs for such
taxable year.

Section 43(b)(1) provides that the
amount of enhanced oil recovery credit
for any taxable year shall be reduced by
an amount which bears the same ratio to
the amount of such credit (determined
without regard to this paragraph) as - (A)
the amount by which the reference price
for the calendar year preceding the calen-
dar year in which the taxable year begins
exceeds $28, bears to (B) $6. Section

43(b)(2) provides that the term "reference
price" means, with respect to any calendar
year, the reference price determined for
such calendar year under § 45K(d)(2)(C).

Section 45I(a) provides that, for pur-
poses of § 38, the marginal well produc-
tion credit for any taxable year is an
amount equal to the product of the credit
amount and the qualified crude oil produc-
tion and the qualified natural gas produc-
tion which is attributable to the taxpayer.

Section 45I(b)(1) provides that the
amount of the marginal well production
credit is $3 per barrel of qualified crude
oil production, and 50 cents per 1,000
cubic feet of qualified natural gas produc-
tion.

Section 45I(b)(2) provides that the $3
and 50 cents amounts under § 45I(b)(1)
shall each be reduced (but not below zero)
by an amount which bears the same ratio
to such amount (determined without re-
gard to this paragraph) as - (i) the excess
(if any) of the applicable reference price
over $15 ($1.67 for qualified natural gas
production), bears to (ii) $3 ($0.33 for
qualified natural gas production). The ap-
plicable reference price for a taxable year
is the reference price of the calendar year
preceding the calendar year in which the
taxable year begins.

Section 45I(c) provides that the term
reference price means, with respect to any
calendar year - (i) in the case of qualified
crude oil production, the reference price
determined under § 45K(d)(2)(C).

Section 613A(c)(6)(A) provides, in
general, the allowance for depletion under
§ 611 shall be computed in accordance
with § 613 with respect to - (i) so much of
the taxpayer's average daily marginal pro-
duction of domestic crude oil as does not
exceed the taxpayer's depletable oil quan-
tity (determined without regard to para-
graph (3)(A)(ii)), and (ii) so much of the
taxpayer's average daily marginal produc-
tion of domestic natural gas as does not

exceed the taxpayer's depletable natural
gas quantity (determined without regard
to paragraph (3)(A)(ii)), and the applica-
ble percentage shall be deemed to be spec-
ified in subsection (b) of § 613 for pur-
poses of subsection (a) of that section.

Section 613A(c)(6)(C) provides that
the term "applicable percentage" means
the percentage (not greater than 25 per-
cent) equal to the sum of - (i) 15 percent,
plus (ii) 1 percentage point for each whole
dollar by which $20 exceeds the reference
price for crude oil for the calendar year
preceding the calendar year in which the
taxable year begins. For purposes of this
paragraph, the term "reference price"
means, with respect to any calendar year,
the reference price determined for such
calendar year under § 45K(d)(2)(C).

## SECTION 3. REFERENCE PRICE

The reference price under § 45K(d)(2)(C)
for calendar year 2015 is $44.39.

## SECTION 4. DRAFTING INFORMATION

The principal author of this notice is
Martha M. Garcia of the Office of Asso-
ciate Chief Counsel (Passthroughs & Spe-
cial Industries). For further information re-
garding this notice, contact Ms. Garcia on
(202) 317-6853 (not a toll-free number).

## 2016 Section 43 Inflation Adjustment

### Notice 2016-44

Section 43(b)(3)(B) of the Internal
Revenue Code requires the Secretary to
publish an inflation adjustment factor. The
enhanced oil recovery credit under § 43
for any taxable year is reduced if the
"reference price," determined under
§ 45K(d)(2)(C), for the calendar year pre-
ceding the calendar year in which the tax-

able year begins is greater than $28 mul-
tiplied by the inflation adjustment factor
for that year.

The term "inflation adjustment factor"
means, with respect to any calendar year,
a fraction the numerator of which is the
GNP implicit price deflator for the preced-
ing calendar year and the denominator of

which is the GNP implicit price deflator
for 1990.

Because the reference price for the
2015 calendar year ($44.39) does not ex-
ceed $28 multiplied by the inflation ad-
justment factor for the 2015 calendar year
($28 multiplied by 1.6464 = $46.01), the
enhanced oil recovery credit for qualified

costs paid or incurred in 2016 is deter-
mined without regard to the phase-out for
crude oil price increases.

Table 1 contains the GNP implicit
price deflator used for the 2016 calendar
year, as well as the previously published
GNP implicit price deflators used for the
1991 through 2015 calendar years.

Notice 2016-44 TABLE 1 GNP IMPLICIT PRICE DEFLATORS

Calendar Year

GNP Implicit Price Deflator

1990

112.9 (used for 1991)

1991

117.0 (used for 1992)

1992

120.9 (used for 1993)

1993

124.1 (used for 1994)

1994

126.0 (used for 1995)*

1995

107.5 (used for 1996)

1996

109.7 (used for 1997) **

1997

112.35 (used for 1998)

1998

112.64 (used for 1999) ***

1999

104.59 (used for 2000)

2000

106.89 (used for 2001)

2001

109.31 (used for 2002)

2002

110.63 (used for 2003)

2003

105.67 (used for 2004) ****

2004

108.23 (used for 2005)

2005

112.129 (used for 2006)

2006

116.036 (used for 2007)

2007

119.656 (used for 2008)

2008

122.407 (used for 2009)

2009

109.764 (used for 2010) *****

2010

110.654 (used for 2011)

2011

113.347 (used for 2012) ******

2012

115.387 (used for 2013)

2013

106.710 (used for 2014) *******

2014

108.407 (used for 2015) ********

2015

109.868 (used for 2016)

\* Beginning in 1995, the GNP implicit price deflator was rebased relative to 1992. The 1990 GNP implicit price deflator
used to compute the 1996 § 43 inflation adjustment factor is 93.6.

** Beginning in 1997, two digits follow the decimal point in the GNP implicit price deflator. The 1990 GNP price deflator
used to compute the 1998 § 43 inflation adjustment factor is 93.63.

*** Beginning in 1999, the GNP implicit price deflator was rebased relative to 1996. The 1990 GNP implicit price defla-
tor used to compute the 2000 § 43 inflation adjustment factor is 86.53.

**** Beginning in 2003, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used to
compute the 2004 § 43 inflation adjustment factor is 81.589.

***** Beginning in 2009, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used to
compute the 2010 § 43 inflation adjustment factor is 72.199.

Beginning in 2011, the 1990 GNP implicit price deflator used to compute the 2012 § 43 inflation adjustment fac-
tor is 72.260.

Beginning in 2013, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used
to compute the 2014 § 43 inflation adjustment factor is 66.803.

Beginning in 2014, the 1990 GNP implicit price deflator used to compute the 2015 § 43 inflation adjustment
factor is 66.732.

Table 2 contains the inflation adjustment factor and the phase-out amount for taxable years beginning in the 2016 calendar year
as well as the previously published inflation adjustment factors and phase-out amounts for taxable years beginning in the 1991
through 2015 calendar years.

Notice 2016-44 TABLE 2 INFLATION ADJUSTMENT FACTORS AND PHASE-OUT AMOUNTS

Calendar Year

Inflation Adjustment Factor

Phase-out Amount

1991

1.0000

1992

1.0363

1993

1.0708

1994

1.0992

1995

1.1160

1996

1.1485

1997

1.1720

1998

1.1999

1999

1.2030

2000

1.2087

2001

1.2353

2002

1.2633

2003

1.2785

2004

1.2952

2005

1.3266

2006

1.3743

100 percent

2007

1.4222

100 percent

2008

1.4666

100 percent

2009

1.5003

100 percent

2010

1.5203

100 percent

2011

1.5326

100 percent

2012

1.5686

100 percent

2013

1.5968

100 percent

2014

1.5974

100 percent

2015

1.6245

100 percent

2016

1.6464

## DRAFTING INFORMATION

The principal author of this notice is Martha M. Garcia of the Office of Associate Chief Counsel (Passthroughs and Special
Industries). For further information regarding this notice, contact Ms. Garcia at (202) 317-6853 (not a toll-free number).

## 2016 Marginal Production Rates

### Notice 2016-45

This notice announces the applicable
percentage under § 613A of the Internal
Revenue Code to be used in determining
percentage depletion for marginal proper-
ties for the 2016 calendar year.

Section 613A(c)(6)(C) defines the term
"applicable percentage" for purposes of
determining percentage depletion for oil
and gas produced from marginal proper-
ties. The applicable percentage is the per-
centage (not greater than 25 percent)
equal to the sum of 15 percent, plus one
percentage point for each whole dollar by
which $20 exceeds the reference price
(determined under § 45K(d)(2)(C)) for

crude oil for the calendar year preceding
the calendar year in which the taxable
year begins. The reference price deter-
mined under § 45K(d)(2)(C) for the 2015
calendar year is $44.39.

The following table contains the appli-
cable percentages for marginal production
for taxable years beginning in calendar
years 1991 through 2016.

Notice 2016-45

APPLICABLE PERCENTAGE FOR MARGINAL PRODUCTION

Calendar Year

Applicable Percentage

1991

15 percent

1992

18 percent

1993

19 percent

1994

20 percent

1995

21 percent

1996

20 percent

1997

16 percent

1998

17 percent

1999

24 percent

2000

19 percent

2001

15 percent

2002

15 percent

2003

15 percent

2004

15 percent

2005

15 percent

2006

15 percent

2007

15 percent

2008

15 percent

2009

15 percent

2010

15 percent

2011

15 percent

2012

15 percent

2013

15 percent

2014

15 percent

2015

15 percent

2016

15 percent

The principal author of this notice is Martha M. Garcia of the Office of Associate Chief Counsel (Passthroughs and Special
Industries). For further information regarding this notice contact Ms. Garcia at (202) 317-6853 (not a toll-free number).

26 CFR § 601.201: Rulings and determination letters.(Also Part I, §§ 401; 1.401(b)-1.)

#### Rev. Proc. 2016-37

Table of Contents

PART I - OVERVIEW

136

SECTION 1. PURPOSE

136

SECTION 2. BACKGROUND

137

SECTION 3. SUMMARY OF SIGNIFICANT MODIFICATIONS

139

PART II - INDIVIDUALLY DESIGNED PLANS

139

SECTION 4. ELIMINATION OF FIVE-YEAR REMEDIAL AMENDMENT CYCLE SYSTEM; OTHER MODIFICATIONS

139

SECTION 5. EXTENSION OF REMEDIAL AMENDMENT PERIOD FOR INDIVIDUALLY DESIGNED PLANS

140

SECTION 6. EXTENDED REMEDIAL AMENDMENT PERIOD TRANSITION RULE FOR INDIVIDUALLY DESIGNED PLANS

141

SECTION 7. TERMINATING PLANS

141

SECTION 8. PLAN AMENDMENT DEADLINE

141

SECTION 9. REQUIRED AMENDMENTS LIST

142

SECTION 10. OPERATIONAL COMPLIANCE LIST

142

SECTION 11. EXAMPLES

142

SECTION 12. SCOPE OF PLAN REVIEW

143

SECTION 13. RELIANCE ON DETERMINATION LETTERS

143

PART III - PRE-APPROVED PLANS

143

SECTION 14. SIX-YEAR REMEDIAL AMENDMENT CYCLE SYSTEM FOR PRE-APPROVED PLANS

143

SECTION 15. EXTENSION OF THE REMEDIAL AMENDMENT PERIOD AND DEADLINES FOR THE ADOPTION OF INTERIM AND DISCRETIONARY PLAN AMENDMENTS FOR PRE-APPROVED PLANS

144

SECTION 16. SCHEDULES FOR THE SECOND AND THIRD SIX-YEAR REMEDIAL AMENDMENT CYCLES

145

SECTION 17. CUMULATIVE LISTS OF CHANGES IN PLAN QUALIFICATION REQUIREMENTS; OPERATIONAL COMPLIANCE LIST

146

SECTION 18. EXTENSION OF DEADLINE FOR AN EMPLOYER TO ADOPT A NEWLY APPROVED PRE-APPROVED DEFINED CONTRIBUTION PLAN AND TO APPLY FOR A

DETERMINATION LETTER (IF APPLICABLE)

146

SECTION 19. ELIGIBILITY FOR SIX-YEAR REMEDIAL AMENDMENT CYCLE SYSTEM

147

SECTION 20. EFFECT OF EMPLOYER AMENDMENTS ON SIX-YEAR REMEDIAL AMENDMENT CYCLE

148

SECTION 21. OFF-CYCLE FILING

149

PART IV - EFFECT ON OTHER DOCUMENTS, EFFECTIVE DATE, DRAFTING INFORMATION

150

SECTION 22. EFFECT ON OTHER DOCUMENTS

150

SECTION 23. EFFECTIVE DATE

150

##### PART I - OVERVIEW

###### SECTION 1. PURPOSE

.01 This revenue procedure modifies
the Internal Revenue Service (IRS) deter-
mination letter program for qualified plans
to eliminate, as of January 1, 2017, the
five-year remedial amendment cycle sys-
tem for individually designed plans, cur-
rently set forth in Rev. Proc. 2007-44,
2007-2 C.B. 54. Effective January 1,
2017, a sponsor of an individually de-
signed plan will be permitted to submit a
determination letter application only for
initial plan qualification, for qualification
upon plan termination, and in certain other

circumstances, as described in section
4.03(3) of this revenue procedure.

.02 This revenue procedure provides an
extended remedial amendment period un-
der § 401(b) of the Internal Revenue Code
(Code) for individually designed plans.

.03 This revenue procedure describes
and makes clarifying changes to the six-
year remedial amendment cycle system
for pre-approved qualified plans and mod-
ifies the six-year remedial amendment cy-
cle system, as applicable, to reflect
changes that have been made to the deter-
mination letter program for individually
designed plans. In addition, this revenue
procedure delays until August 1, 2017, the
beginning of the 12-month submission pe-

riod for master and prototype (M&P) plan
sponsors and volume submitter (VS) prac-
titioners to submit pre-approved defined
contribution plans for opinion or advisory
letters during the third six-year remedial
amendment cycle.

.04 The extended remedial amendment
period for individually designed plans and
the six-year remedial amendment cycle
system for pre-approved plans are estab-
lished pursuant to the authority under
§ 401(b) and its underlying regulations to
extend the remedial amendment period
and pursuant to the authority under
§ 7805(b) to establish the effective date of
any rule or regulation.

.05 This revenue procedure is effective
January 1, 2017. This revenue procedure
clarifies, modifies, and supersedes Rev.
Proc. 2007-44, modifies sections 2.07
and 24.03 of Rev. Proc. 2015-36,
2015-27 I.R.B. 20, and modifies sections
I and III of Notice 2015-84, 2015-52
I.R.B. 880.

### SECTION 2. BACKGROUND

.01 Section 401(b) provides a remedial
amendment period during which a plan
may be amended retroactively to comply
with the Code's qualification require-
ments. Section 1.401(b)-1 of the Income
Tax Regulations describes the disqualify-
ing provisions that may be amended ret-
roactively and the remedial amendment
period during which retroactive amend-
ments may be adopted. The regulations
also grant the Commissioner the discre-
tion to designate certain plan provisions as
disqualifying provisions and to extend the
remedial amendment period.

.02 Section 7805(b)(1) provides that,
except as otherwise provided, no tempo-
rary, proposed, or final regulation relating
to the internal revenue laws shall apply to
any taxable period ending before the ear-
liest of the following dates: (i) the date on
which such regulation is filed with the
Federal Register; (ii) in the case of any
final regulation, the date on which any
proposed or temporary regulation to
which such final regulation relates was
filed with the Federal Register; or (iii) the
date on which any notice substantially de-
scribing the expected contents of any tem-
porary, proposed, or final regulation is
issued to the public.

.03 Section 7805(b)(8) provides that
the Secretary may prescribe the extent, if
any, to which any ruling (including any
judicial decision or any administrative de-
termination other than by regulation) re-
lating to the internal revenue laws shall be
applied without retroactive effect.

.04 Section 1.401(b)-1 provides that a
plan that fails to satisfy the requirements of
§ 401(a) solely as a result of a disqualifying
provision defined under § 1.401(b)-1(b)
need not be amended to comply with those
requirements until the last day of the reme-
dial amendment period with respect to the
disqualifying provision, provided the
amendment is made retroactively effective
to the beginning of the remedial amendment

period. Under § 1.401(b)-1(b)(1), a disqual-
ifying provision includes a provision of a
new plan, the absence of a provision from a
new plan, or an amendment to an existing
plan that causes the plan to fail to satisfy the
requirements of the Code applicable to
the qualification of the plan as of the date
the plan or amendment is first made effec-
tive. Under § 1.401(b)-1(b)(3), a disquali-
fying provision includes a plan provision
designated, at the Commissioner's discre-
tion, as a disqualifying provision that either
(i) results in the failure of the plan to satisfy
the qualification requirements of the Code
by reason of a change in those requirements,
or (ii) is integral to a qualification require-
ment of the Code that has been changed. For
this purpose, § 1.401(b)-1(c)(1) provides
that a disqualifying provision includes the
absence from a plan of a provision required
by or, if applicable, integral to the applicable
change in the qualification requirements of
the Code, if the plan was in effect on the
date the change in those requirements be-
came effective with respect to the plan. Un-
der § 1.401(b)-1(c)(3), the Commissioner
may impose limits and provide additional
rules regarding the amendments that may be
made with respect to disqualifying provi-
sions described in § 1.401(b)-1(b)(3).

.05 For a disqualifying provision of a
new plan described in § 1.401(b)-1(b)(1),
the remedial amendment period begins on
the date the plan is put into effect and, in
the case of a plan maintained by one em-
ployer, ends on the later of (i) the due date
(including extensions) for filing the em-
ployer's tax return for the taxable year in
which the plan is put into effect; or (ii) the
last day of the plan year in which the plan
is put into effect. In the case of a new plan
maintained by more than one employer,
the remedial amendment period ends
on the last day of the tenth month follow-
ing the last day of the plan year that in-
cludes the date the plan is put into effect.

.06 For a disqualifying provision that is
an amendment to an existing plan de-
scribed in § 1.401(b)-1(b)(1), the reme-
dial amendment period begins on the ear-
lier of the date the plan amendment is
adopted or put into effect and, in the case
of a plan maintained by one employer,
ends on the later of (i) the due date (in-
cluding extensions) for filing the employ-
er's tax return for the taxable year in
which the amendment is adopted or effec-

tive (whichever is later); or (ii) the last
day of the plan year in which the amend-
ment is adopted or effective (whichever is
later). In the case of an amendment to an
existing plan maintained by more than one
employer, the remedial amendment period
ends on the last day of the tenth month
following the last day of the plan year in
which the amendment is adopted or effec-
tive (whichever is later).

.07 For a disqualifying provision de-
scribed in § 1.401(b)-1(b)(3), the reme-
dial amendment period begins on the date
on which the change becomes effective
with respect to the plan or, in the case of
a provision that is integral to a qualifica-
tion requirement that has been changed,
the first day on which the plan is operated
in accordance with the provision as
amended. In the case of a plan maintained
by one employer, the remedial amend-
ment period for a disqualifying provision
described in § 1.401(b)-1(b)(3) ends on
the later of: (i) the due date (including
extensions) for filing the income tax re-
turn for the employer's taxable year that
includes the date on which the remedial
amendment period begins; or (ii) the last
day of the plan year that includes the date
on which the remedial amendment period
begins. In the case of a plan maintained by
more than one employer the remedial
amendment period ends on the last day of
the tenth month following the last day of
the plan year in which the remedial
amendment period begins.

.08 Section 1.401(b)-1(f) provides that
the Commissioner has discretion to extend
the remedial amendment period.

.09 Rev. Proc. 2007-44 sets forth rules
and procedures for a system of cyclical
remedial amendment periods under
§ 401(b) for individually designed plans
and for a system of cyclical remedial
amendment periods under § 401(b) for
pre-approved qualified plans, including
the following:

(1) Section 4.01 provides that the IRS
intends to publish annually Cumulative
Lists of Changes in Plan Qualification Re-
quirements (Cumulative Lists). The Cu-
mulative Lists are intended to identify, on
a year-by-year basis, all changes in qual-
ification requirements resulting from
changes in statutes, or from regulations or
other guidance published in the Internal
Revenue Bulletin, that are required to be

taken into account in the written plan doc-
ument that is submitted to the IRS for an
opinion, advisory, or determination letter,
as applicable.

(2) Section 5.04 provides that when
there are statutory or regulatory changes
with respect to plan qualification require-
ments that will impact provisions of the
written plan document, the adoption of an
interim amendment generally will be re-
quired.

(3) Section 9 generally provides that an
individually designed plan's five-year re-
medial amendment cycle (Cycle A, B, C,
D, or E) is determined by reference to the
last digit of the employer identification
number (EIN) of the employer that spon-
sors the plan. However, Section 10.06
provides that, if more than one plan is
maintained by members of a controlled
group under § 414(b) or (c) or an affiliated
service group under § 414(m), the em-
ployers may elect that the five-year reme-
dial amendment cycle for all plans main-
tained by any members of the group (other
than multiemployer plans under § 414(f),
multiple employer plans, governmental
plans under § 414(d), or certain jointly
trusteed single employer collectively bar-
gained plans) will be Cycle A. In general,
the Cycle A election must be made jointly
by all members of the controlled group or
affiliated service group. However, in the
case of a parent-subsidiary controlled
group, this election may be made on be-
half of all of the members by the parent.

(4) Section 10.08(1) provides that, in
the case of a Cycle A election under sec-
tion 10.06 that does not involve a parent-
subsidiary controlled group, if a new
member joins the controlled group, that
member must make an election no later
than one year from the date the new mem-
ber joins the controlled group in order for
other members to maintain the existing
election.

(5) Section 13.02 provides that deter-
mination letters issued for individually de-
signed plans will include a statement that
the letter may not be relied on after the
end of the plan's first five-year remedial
amendment cycle that ends more than 12
months after the application was received,
and will include a specific "expiration
date."

.10 Notice 2010-90, 2010-52 I.R.B.
909, included the 2010 Cumulative List of

Changes in Plan Qualification Require-
ments, which contains qualification re-
quirements for pre-approved defined con-
tribution plans to be used for the second
submission period under the six-year re-
medial amendment cycle and for certain
single employer individually designed
plans.

.11 Announcement 2012-3, 2012-4
I.R.B. 335, extended to April 2, 2012, the
deadline to submit on-cycle applications
for opinion and advisory letters for pre-
approved defined contribution plans for
the plans' second six-year remedial
amendment cycle.

.12 In Announcement 2014-16,
2014-17 I.R.B. 983, the IRS announced it
would issue opinion and advisory letters
for pre-approved defined contribution
plans that were restated for changes in
plan qualification requirements listed in
the 2010 Cumulative List and that were
filed with the IRS during the plans' sec-
ond submission period under the remedial
amendment cycle under Rev. Proc. 2007-
44. The announcement provided that em-
ployers using these pre-approved plan
documents to restate a plan for the plan
qualification requirements on the 2010
Cumulative List would be required to
adopt the plan document by April 30,
2016, and that the IRS would accept ap-
plications for individual determination
letters from employers under the second
six-year remedial amendment cycle for
pre-approved defined contribution plans
starting May 1, 2014, and ending April 30,
2016.

.13 Announcement 2014-41, 2014-52
I.R.B. 979, extended to June 30, 2015, the
deadline for submitting on-cycle applica-
tions for opinion and advisory letters for
pre-approved defined benefit plans for the
plans' second six-year remedial amend-
ment cycle, as previously extended in An-
nouncement 2014-4, 2014-7 I.R.B. 523.

.14 Rev. Proc. 2015-36 provided rules
for issuing opinion and advisory letters for
pre-approved plans. This revenue proce-
dure also extended to October 30, 2015,
the deadline for submitting on-cycle ap-
plications for opinion and advisory letters
for pre-approved defined benefit plans for
the plans' second six-year remedial
amendment cycle.

.15 Announcement 2015-19, 2015-32
I.R.B. 157, announced the elimination of

the five-year remedial amendment cycle
system for individually designed plans
and provided that the scope of the deter-
mination letter program for individually
designed plans would be limited to deter-
mination letter applications for initial plan
qualification, for qualification upon termi-
nation, and in certain other circumstances.
This announcement also provided a tran-
sition rule with respect to the remedial
amendment period for certain plans cur-
rently operating under the five-year reme-
dial amendment cycle system, and an-
nounced that the IRS, as of July 21, 2015,
would cease accepting off-cycle determi-
nation letter applications (as defined in
section 14 of Rev. Proc. 2007-44), except
with respect to new and terminating plans.

.16 Notice 2015-84 included the 2015
Cumulative List of Changes in Plan Qual-
ification Requirements, which contains
qualification requirements for single em-
ployer individually designed defined con-
tribution plans and defined benefit plans,
to be used primarily by plan sponsors of
such plans that fall in Cycle A.

.17 Rev. Proc. 2016-6, 2016-1 I.R.B.
200, set forth the annual update of proce-
dures for issuing determination letters on
the qualified status of plans. Rev. Proc.
2016-6 provided that, effective as of Jan-
uary 4, 2016, determination letters issued
to sponsors of individually designed plans
would no longer contain an expiration
date.

.18 Notice 2016-03, 2016-3 I.R.B.
278, announced that guidance will be is-
sued to provide that: (i) controlled groups
and affiliated service groups that have pre-
viously made a Cycle A election are per-
mitted to submit determination letter ap-
plications during the Cycle A submission
period beginning February 1, 2016, and
ending January 31, 2017; (ii) expiration
dates on determination letters issued prior
to January 4, 2016, are no longer opera-
tive; and (iii) the period during which
certain employers may, on or after Janu-
ary 1, 2016, establish or adopt a pre-
approved defined contribution plan and, if
permissible, apply for a determination let-
ter, is extended from April 30, 2016, to
April 30, 2017.

### SECTION 3. SUMMARY OF SIGNIFICANT MODIFICATIONS

.01 Consistent with Announcement
2015-19, this revenue procedure elimi-
nates, as of January 1, 2017, the staggered
five-year remedial amendment cycle sys-
tem for individually designed plans, cur-
rently set forth in Rev. Proc. 2007-44.
This revenue procedure also provides new
rules, as described in paragraphs (1)
through (5) of this section 3.01, for indi-
vidually designed plans. A sponsor of an
individually designed plan will be permit-
ted to submit a determination letter appli-
cation for initial plan qualification, for
qualification upon termination, and in
other circumstances. See section 4.03 of
this revenue procedure.

(1) Effective January 1, 2017, the in-
terim amendment requirement set forth in
section 5.04 of Rev. Proc. 2007-44 will
no longer apply to individually designed
plans. See section 4.02 of this revenue
procedure.

(2) With respect to individually de-
signed plans, for disqualifying provisions
that arise as a result of a change in qual-
ification requirements, the Department of
the Treasury (Treasury) and the IRS in-
tend to publish annually a Required
Amendments List, which will establish
the deadline for a plan to be amended to
comply with requirements described in
section 5.03 of this revenue procedure that
are identified on the list. The deadline
(that is, the end of the remedial amend-
ment period for a change to a qualification
requirement included on a particular Re-
quired Amendments List) will be, unless
otherwise provided, the end of the second
calendar year following the year in which
the list is issued. In general, a change to
the qualification requirements will not ap-
pear on a Required Amendments List until
guidance with respect to such change (in-
cluding model amendments, if any) has
been provided in regulations or in other
guidance published in the Internal Reve-
nue Bulletin. The first Required Amend-
ments List generally will apply to changes
in qualification requirements first effec-
tive during the 2016 calendar year. See
sections 4, 5, and 9 of this revenue proce-
dure.

(3) This revenue procedure extends the
remedial amendment period for individu-

ally designed plans to correct disqualify-
ing provisions (i) that are in new plans, (ii)
that arise as a result of amendments made
to existing plans, and (iii) that arise as a
result of a change in qualification require-
ments. See section 5 of this revenue pro-
cedure.

(4) For individually designed plans, a
transition rule extends the remedial
amendment period for certain disqualify-
ing provisions to December 31, 2017. See
section 6 of this revenue procedure.

(5) The scope of review of an individ-
ually designed plan submitted for a deter-
mination letter is described in section 12
of this revenue procedure.

(6) The effect of subsequent changes in
law and plan amendments on the reliance
by the sponsor of an individually designed
plan on a prior determination letter is de-
scribed in section 13 of this revenue pro-
cedure.

.02 A description of, and clarifying
changes to, the six-year remedial amend-
ment cycle system for pre-approved plans,
and modifications of the six-year remedial
amendment cycle system to reflect
changes that have been made to the deter-
mination letter program for individually
designed plans, are provided in Part III of
this revenue procedure. In addition, the
time to adopt a newly approved pre-
approved defined contribution plan and to
file for a determination letter for certain
adopters of pre-approved defined contri-
bution plans for the second six-year reme-
dial amendment cycle is extended to April
30, 2017.

.03 The beginning of the 12-month
submission period for M&P sponsors and
VS practitioners to submit pre-approved
defined contribution plans for opinion or
advisory letters during the third six-year
remedial amendment cycle is delayed un-
til August 1, 2017. See section 16 of this
revenue procedure.

.04 To assist sponsors in achieving op-
erational compliance with the Code's
qualification requirements, the IRS in-
tends to provide annually an Operational
Compliance List that identifies changes in
qualification requirements that are effec-
tive during a calendar year. See sections
10 and 17.05 of this revenue procedure.

# PART II - INDIVIDUALLY DESIGNED PLANS

# SECTION 4. ELIMINATION OF FIVE-YEAR REMEDIAL AMENDMENT CYCLE SYSTEM; OTHER MODIFICATIONS

.01 Effective January 1, 2017, the stag-
gered five-year remedial amendment cy-
cle system for individually designed plans
is eliminated. As of that date, the IRS will
no longer accept determination letter ap-
plications based on the five-year remedial
amendment cycle system. However, spon-
sors of Cycle A plans (that is, generally,
plan sponsors with employer identifica-
tion numbers ending in 1 or 6) will con-
tinue to be permitted to submit determi-
nation letter applications during the period
beginning February 1, 2016, and ending
January 31, 2017. For this purpose, con-
trolled groups and affiliated service
groups that maintain more than one plan
are permitted to submit determination let-
ter applications during the Cycle A sub-
mission period beginning February 1,
2016, and ending January 31, 2017, pro-
vided that a prior Cycle A election with
respect to the controlled group or affili-
ated service group had been made by Jan-
uary 31, 2012 (the last day of the previous
Cycle A submission period) and any new
member of the controlled group or affili-
ated service group made a timely election
to join the group in accordance with sec-
tion 10.08(1) of Rev. Proc. 2007-44, if
applicable. See section 10.06 of Rev.
Proc. 2007-44.

.02 Effective January 1, 2017, plan
sponsors of individually designed plans
will no longer be required to adopt interim
amendments, as required by section 5.04
of Rev. Proc. 2007-44. This change ap-
plies with respect to interim amendments
that would have had an adoption deadline
on or after January 1, 2017, had the in-
terim amendment requirement remained
in effect. The interim amendment require-
ment continues to apply to individually
designed plans with respect to interim
amendments with an adoption deadline
prior to January 1, 2017.

.03 Effective January 1, 2017, a spon-
sor of an individually designed plan will
be permitted to submit a determination
letter application for initial plan qualifica-
tion, for qualification upon termination,

and in other circumstances, as described
in section 4.03(1), (2), and (3) of this
revenue procedure.

(1) Initial plan qualification. An em-
ployer may submit a plan for initial plan
qualification on a Form 5300 (Application
for Determination for Employee Benefit
Plan) as long as a favorable determination
letter has never been issued with respect
to the plan. Thus, for example, an em-
ployer that maintains a plan for which a
determination letter has been issued as a
result of filing a Form 5300 or Form 5307
(Application for Determination for Adopt-
ers of Modified Volume Submitter Plans)
is not eligible to submit that plan for a
determination letter for initial qualifica-
tion.

(2) Qualification upon plan termina-
tion. An application is filed in connection
with plan termination only if it is filed no
later than the later of (i) one year from the
effective date of the termination, or (ii)
one year from the date on which the action
terminating the plan is taken. However, in
no event may the application be filed later
than 12 months from the date of distribu-
tion of substantially all plan assets in con-
nection with the plan termination.

(3) Other circumstances. Consider-
ation will be given annually to whether
determination letter applications will be
accepted for individually designed plans
in specified circumstances other than for
initial qualification and qualification upon
plan termination. Circumstances that will
be considered when evaluating whether to
accept determination letter applications
for certain amended plans or types of
amendments in plans in certain future
years, include, for example, significant
law changes, new approaches to plan de-
sign, and the inability of certain types of
plans to convert to pre-approved (that is,
M&P and VS) plan documents. In addi-
tion, the IRS's current case load and re-
sources available to process determination
letter applications will be significant fac-
tors in deciding if and when to consider
certain amended plans or types of amend-
ments in plans under the determination
letter program. Additional situations in
which plan sponsors will be permitted to
request determination letters will be an-

nounced in guidance published in the In-
ternal Revenue Bulletin. Treasury and the
IRS intend to request, on a periodic basis,
comments on the additional situations in
which the submission of a determination
letter application may be appropriate.
Based on an analysis of the factors listed
in this section 4.03(3), including the IRS's
current resources and case load, the only
determination letter applications for indi-
vidually designed plans that will be ac-
cepted during calendar year 2017 (other
than for Cycle A plans as described in
section 4.01) are applications for initial
plan qualification and qualification upon
plan termination.

# SECTION 5. EXTENSION OF REMEDIAL AMENDMENT PERIOD FOR INDIVIDUALLY DESIGNED PLANS

.01 The provisions of this section 5
apply to disqualifying provisions (as de-
fined in section 5.02 and 5.03 of this rev-
enue procedure) that are first effective on
or after January 1, 2016.

.02 Pursuant to § 1.401(b)-1(b)(1), a
disqualifying provision includes a provi-
sion of a new plan, the absence of a pro-
vision from a new plan, or an amendment
to an existing plan that causes the plan to
fail to satisfy the requirements of the Code
applicable to the qualification of the plan
as of the date the plan or amendment is
first made effective. In addition, pursuant
to § 1.401(b)-1(b)(3), a disqualifying pro-
vision includes a plan provision that has
been designated by the Commissioner, in
section 5.03 of this revenue procedure or
subsequent guidance published in the In-
ternal Revenue Bulletin, as a disqualifying
provision by reason of a change in those
requirements.

.03 Pursuant to § 1.401(b)-1(b)(3), the
IRS designates a plan provision as a dis-
qualifying provision if it:

(1) results in the failure of the plan to
satisfy the qualification requirements of
the Code by reason of a change in those
requirements that is effective after De-
cember 31, 2001;1 or

(2) is integral to such disqualifying
provision.

.04 A change in qualification require-
ments includes a statutory change or a
change in the requirements provided in
regulations or other guidance published in
the Internal Revenue Bulletin. In addition,
a disqualifying provision, as described in
section 5.03 of this revenue procedure,
includes the absence from a plan of a
provision required by (or, if applicable,
integral to) the change in the qualification
requirements of the Code.

.05 Except as otherwise provided by
statute, or regulations or other guidance
published in the Internal Revenue Bulle-
tin, the remedial amendment period that
would otherwise apply under § 1.401(b)-1
for the disqualifying provisions described
in this section 5.05 is extended as follows
for plans that are not governmental plans
within the meaning of § 414(d):

(1) New plan. The remedial amend-
ment period for a disqualifying provision
with respect to a provision of a new plan
or the absence of a provision from a new
plan is extended to the later of (i) the 15th
day of the 10th calendar month after the
end of the plan's initial plan year or (ii)
the "modified § 401(b) expiration date."
The modified § 401(b) expiration date is
defined in this section 5.05(1)(a) and (b):

(a) The modified § 401(b) expiration
date for a plan that is not maintained by a
tax exempt employer is the last day of the
remedial amendment period determined
under § 1.401(b)-1(d)(2), applied as
though the employer has an extension to
file its income tax return (or partnership
return of income).

(b) The modified § 401(b) expiration
date for a plan maintained by a tax exempt
employer is the last day of the remedial
amendment period determined under
§ 1.401(b)-1(d)(2) applied as though the
due date (including extensions) for filing
the income tax return for the employer's
taxable year is the date determined under
the following rules. The due date for filing
the employer's tax return in the case of a
tax exempt employer that files Form
990-T (or Form 990 or Form 990-EZ if
no Form 990-T is filed) is the later of (i)
the 15th day of the 10th month after the
end of the employer's tax year (treating
the calendar year as the tax year if the

1 As provided in section 5.01 of Rev. Proc. 2007-44, December 31, 2001, was the date after which all changes in qualification requirements were designated as disqualifying provisions by
the Commissioner in order for those changes to be eligible for the remedial amendment period available with respect to disqualifying provisions.

employer does not have a tax year) or (ii)
the due date for filing the Form 990 series
(plus extensions). For the purpose of this
section 5.05(1), an employer is treated as
having obtained an extension of time for
filing the Form 990 series. The due date for
filing the employer's tax return in the case
of a tax exempt employer that is not re-
quired to file a Form 990 series return is the
15th day of the 10th month after the end of
the employer's tax year (treating the calen-
dar year as the tax year if the employer does
not have a tax year).

(2) Amendment to existing plan. The
remedial amendment period for a disqual-
ifying provision with respect to an amend-
ment to an existing plan (other than an
amendment described in section 5.05(3) of
this revenue procedure) is extended to the
end of the second calendar year following
the calendar year in which the amendment is
adopted or effective, whichever is later.

(3) Change in qualification require-
ments. The remedial amendment period
for a disqualifying provision with respect
to a change in qualification requirements
(as described in section 5.04 of this reve-
nue procedure) is extended to the end of
the second calendar year that begins after
the issuance of the Required Amendments
List (described in section 9 of this revenue
procedure) in which the change in quali-
fication requirements appears.

.06 Except as otherwise provided by
statute, or by regulations or other guid-
ance published in the Internal Revenue
Bulletin, the remedial amendment period
that would otherwise apply under
§ 1.401(b)-1 for the disqualifying provi-
sions described in this section 5.06 is ex-
tended as follows for plans that are gov-
ernmental plans within the meaning of
§ 414(d):

(1) New plan. The remedial amend-
ment period for a disqualifying provision
with respect to a provision of a new gov-
ernmental plan or the absence of a provi-
sion from a new governmental plan is
extended to the later of: (i) the date deter-
mined in section 5.05(1) of this revenue
procedure; or (ii) 90 days after the close of
the second regular legislative session of
the legislative body with the authority to
amend the plan that begins after the end of
the plan's initial plan year.

(2) Amendment to existing plan. The
remedial amendment period for a disqual-

ifying provision with respect to an amend-
ment to an existing governmental plan
(other than an amendment described in
paragraph (3) of this section 5.06) is ex-
tended to the later of: (i) the date deter-
mined in section 5.05(2) of this revenue
procedure; and (ii) 90 days after the close
of the third regular legislative session of
the legislative body with the authority to
amend the plan that begins after the cal-
endar year in which the amendment is
adopted or effective (whichever is later).

(3) Change in qualification require-
ments. The remedial amendment period
for a disqualifying provision in a govern-
mental plan that arises as a result of a
change in qualification requirements (as
described in section 5.03 of this revenue
procedure) is extended to the later of: (i)
the date determined in section 5.05(3) of
this revenue procedure; or (ii) 90 days
after the close of the third regular legisla-
tive session of the legislative body with
the authority to amend the plan that begins
on or after the date of issuance of the
Required Amendments List in which the
change in qualification requirements ap-
pears.

.07 This revenue procedure does not
provide relief from the requirements of
§ 411(d)(6) for any plan amendments, in-
cluding plan amendments adopted as a
result of changes to the qualification re-
quirements. Except to the extent permitted
under § 411(d)(6) and the regulations
thereunder, or under a statutory provision,
§ 411(d)(6) prohibits a plan amendment
that decreases a participant's accrued ben-
efits or that has the effect of eliminating or
reducing an early retirement benefit or
retirement-type subsidy, or eliminating an
optional form of benefit, with respect to
benefits attributable to service before the
amendment. However, an amendment that
eliminates or decreases benefits that have
not yet accrued does not violate
§ 411(d)(6), provided the amendment is
adopted and effective before the benefits
accrue.

# SECTION 6. EXTENDED REMEDIAL AMENDMENT PERIOD TRANSITION RULE FOR INDIVIDUALLY DESIGNED PLANS

Section 5.03 of Rev. Proc. 2007-44
extends the remedial amendment period
for certain disqualifying provisions under

§ 401(b) (including provisions designated
in Rev. Proc. 2007-44 as disqualifying
provisions) to the end of a plan's applica-
ble remedial amendment cycle. As a result
of the elimination of the five-year reme-
dial amendment cycle system for individ-
ually designed plans, the extended reme-
dial amendment period provided in
section 5.03 of Rev. Proc. 2007-44 will
expire December 31, 2016. However, pur-
suant to this revenue procedure, the reme-
dial amendment period is extended to De-
cember 31, 2017, for disqualifying
provisions for which, as of January 1,
2017, the remedial amendment period un-
der section 5.03 of Rev. Proc. 2007-44
has not expired. The extension provided in
this section 6 does not apply to disquali-
fying provisions set forth on the 2016
Required Amendments List. See section
5.05(3) of this revenue procedure, which
provides that the remedial amendment pe-
riod for a disqualifying provision set forth
on a Required Amendments List is ex-
tended to the end of the second calendar
year that begins after the issuance of the
Required Amendments List in which such
provision appears. See also section 9 of
this revenue procedure for a description of
the Required Amendments List.

## SECTION 7. TERMINATING PLANS

Notwithstanding sections 5 and 6 of
this revenue procedure, the termination of
a plan ends the plan's remedial amend-
ment period and, thus, generally will
shorten the remedial amendment period
for the plan. Accordingly, any retroactive
remedial plan amendments or other re-
quired plan amendments for a terminating
plan (that is, plan amendments required to
be adopted to reflect qualification require-
ments that apply as of the date of termi-
nation) must be adopted in connection
with the plan termination regardless of
whether such requirements are included
on a Required Amendments List.

## SECTION 8. PLAN AMENDMENT DEADLINE

.01 With respect to a disqualifying pro-
vision described in section 5 of this reve-
nue procedure, except as otherwise pro-
vided by statute, or in regulations or other
guidance published in the Internal Reve-

nue Bulletin, the plan amendment dead-
line is the date on which the remedial
amendment period with respect to such
disqualifying provision expires. See sec-
tions 5.05 and 5.06 of this revenue proce-
dure for the determination of the applica-
ble remedial amendment period.

.02 With respect to a discretionary
amendment (that is, an amendment that is
not made with respect to a disqualifying
provision), except as otherwise provided
by statute, or in regulations or other guid-
ance published in the Internal Revenue
Bulletin, the plan amendment deadline is
the date described in paragraph (1) or (2)
of this section 8.02, as applicable.

(1) In the case of a discretionary
amendment to a plan other than a govern-
mental plan within the meaning of
§ 414(d), the plan amendment deadline is
the end of the plan year in which the plan
amendment is operationally put into ef-
fect. An amendment is operationally put
into effect when the plan is administered
in a manner consistent with the intended
plan amendment (rather than existing plan
terms). For example, the deadline for
adopting a discretionary amendment with
respect to a calendar year plan that in-
creases participants' accrued benefits and
is operationally put into effect during
2018 is December 31, 2018. As another
example, the deadline for adopting a dis-
cretionary amendment with respect to a
calendar year plan that is operationally put
into effect during 2018 to provide a new
right or benefit as of January 1, 2011, with
respect to participants with same-sex
spouses is December 31, 2018. See Notice
2015-86, 2015-52 I.R.B. 887, Q&A-5.

(2) In the case of a discretionary
amendment to a governmental plan within
the meaning of § 414(d), the plan amend-
ment deadline is the later of: (i) the end of
the plan year in which the plan amendment
is operationally put into effect; or (ii) 90
days after the close of the second regular
legislative session of the legislative body
with the authority to amend the plan that
begins on or after the date the plan amend-
ment is operationally put into effect.

## SECTION 9. REQUIRED AMENDMENTS LIST

.01 Treasury and the IRS intend to pub-
lish annually a Required Amendments
List that generally applies to changes in

qualification requirements that become ef-
fective on or after January 1, 2016. The
Required Amendments List establishes
the date that the remedial amendment pe-
riod expires for changes in qualification
requirements contained on the list, as de-
scribed in section 5.03 of this revenue
procedure. See also section 12 of this rev-
enue procedure, which describes the scope
of review by the IRS of a plan submitted
for a determination letter.

.02 In general, an item will be included
on a Required Amendments List after
guidance with respect to such item (in-
cluding any model amendment) has been
provided in regulations or in other guid-
ance published in the Internal Revenue
Bulletin. However, in the discretion of the
IRS, an item may be included on a Re-
quired Amendments List in other circum-
stances, such as when a statutory change
is enacted and it is anticipated that no
guidance will be issued.

## SECTION 10. OPERATIONAL COMPLIANCE LIST

The remedial amendment period per-
mits a plan to be amended retroactively to
comply with a change in plan qualification
requirements; however, a plan must be op-
erated in compliance with a change in qual-
ification requirements from the effective
date of the change. To assist plan sponsors
in achieving operational compliance, the
IRS intends to provide annually an Opera-
tional Compliance List to identify changes
in qualification requirements that are effec-
tive during a calendar year. In order to be
qualified, however, a plan must comply op-
erationally with each relevant qualification
requirement, even if the requirement is not
included on an Operational Compliance List.

## SECTION 11. EXAMPLES

Examples 1 through 7 illustrate the ex-
tended remedial amendment period for
new plans, amendments made to existing
plans that are not made as a result of
changes in qualification requirements, and
amendments to existing plans that are
made as a result of changes in qualifica-
tion requirements. In each of these exam-
ples, assume that the plan is an individu-
ally designed plan that is intended to be
qualified under § 401(a) and that the plan

amendments meet the requirements of
§ 411(d)(6).

Example 1: Remedial amendment period for a
new plan. Employer A, which is not a tax exempt
employer, adopts a new individually designed plan,
Plan M, on July 1, 2017. Plan M is effective January
1, 2017. Plan M's plan year and Employer A's tax
year are the calendar year. Plan M contains a provi-
sion that does not satisfy the qualification require-
ments (a disqualifying provision under § 401(b)).
Employer A discovers the disqualifying provision in
February 2018. Pursuant to section 5.05(1) of this
revenue procedure, the remedial amendment period
for this disqualifying provision is extended to the
later of (i) October 15, 2018 (the 15th day of the 10th
calendar month after the end of the plan's initial plan
year), or (ii) the modified § 401(b) expiration date.
The modified § 401(b) expiration date is the later of
September 15, 2018 (the due date for filing Em-
ployer A's tax return plus extensions) and the last
day of the plan year in which the plan is put into
effect (December 31, 2017). Thus, Employer A must
correct the disqualifying provision in Plan M by
October 15, 2018, retroactively effective beginning
January 1, 2017, in order for Plan M to be qualified,
and must correct Plan M's operation to the extent
necessary to reflect the corrective amendment.

Example 2: Determination letter application filed
for a new plan. The facts are the same as in Example 1,
except that, instead of Employer A identifying the
disqualifying provision, Employer A files a determina-
tion letter application and the IRS discovers the error. If
Employer A submits Plan M for a determination letter
by October 15, 2018, then, pursuant to § 1.401(b)-
1(e)(3), Employer A would have until 91 days after the
date a favorable determination letter is issued with
respect to Plan M to adopt an amendment that corrects
the disqualifying provision retroactively effective be-
ginning January 1, 2017 (the effective date of Plan M).
To maintain plan qualification, Employer A must cor-
rect Plan M's operation to the extent necessary to
reflect the corrective amendment.

Example 3: Remedial amendment period for
amendment to an existing plan. Employer B main-
tains Plan N, an individually designed plan. In 2014,
the IRS issued a determination letter for Plan N. On
January 1, 2018, Employer B adopts and makes effec-
tive an amendment to Plan N's vesting schedule. This
amendment causes Plan N to fail to satisfy the require-
ments of the Code. Pursuant to section 5.05(2) of this
revenue procedure, a remedial amendment to correct
this disqualifying provision generally must be adopted
by December 31, 2020, the end of the second calendar
year following the calendar year in which the amend-
ment is adopted or effective (whichever is later). The
remedial amendment must be retroactively effective
beginning January 1, 2018, the date the earlier plan
amendment was effective, in order for Plan N to be
qualified. Also, to maintain plan qualification, Em-
ployer B must correct Plan N's operation to the extent
necessary to reflect the corrective amendment.

Example 4: Remedial amendment period for a
change in qualification requirements. Employer C
maintains Plan O, an individually designed plan. In
July 2016, guidance is published in the Internal
Revenue Bulletin that would require an amendment
to Employer C's plan in order to retain the plan's
qualification. The guidance is effective in 2017. The

guidance is included on the 2017 Required Amend-
ments List. Pursuant to section 5.05(3) of this reve-
nue procedure, the remedial amendment period for
items identified on the 2017 Required Amendments
List expires December 31, 2019, the end of the
second calendar year that begins after the issuance of
the Required Amendments List in which the guid-
ance appears; therefore, the expiration of the reme-
dial amendment period for the disqualifying provi-
sion in Plan O is December 31, 2019. The plan
amendment deadline for the change in qualification
requirements is also December 31, 2019, pursuant to
section 8.01 of this revenue procedure.

Example 5: Correction of amendment made due
to a change in qualification requirements. Employer
D maintains Plan P, an individually designed plan. In
2015, the IRS issued a determination letter for Plan
P. On April 1, 2018, Employer D amends Plan P
based on a change in a qualification requirement that
was identified on the 2017 Required Amendments
List. This amendment was effective January 1, 2017.
Pursuant to section 5.05(3) of this revenue proce-
dure, the remedial amendment period for the change
in qualification requirements expires December 31,
2019, the end of the second calendar year that begins
after the issuance of the Required Amendments List
in which the change in qualification requirements
was identified. In October 2019, Employer D discov-
ers the amendment does not satisfy the qualification
requirements of the Code; therefore, Plan P still
contains a disqualifying provision. To maintain plan
qualification, Employer D must correct the disqual-
ifying provision in Plan P by amending the plan not
later than December 31, 2019, retroactively effective
beginning January 1, 2017, and must correct Plan P's
operation to the extent necessary to reflect the cor-
rective amendment.

Example 6: Governmental Plans - remedial
amendment period for a change in qualification re-
quirements. State E maintains Plan Q, a governmen-
tal plan within the meaning of § 414(d). In Septem-
ber 2015, the IRS issued a determination letter for
Plan Q. The legislature of State E annually convenes
January 4 and adjourns March 31. On March 1,
2020, the legislature of State E amends Plan Q based
on a change in a qualification requirement that was
identified on the 2018 Required Amendments List.
This amendment is effective January 1, 2020. In Jan-
uary 2021, State E discovers the amendment created a
disqualifying provision. Generally, pursuant to section
5.06(3) of this revenue procedure, the legislature of
State E has until the later of (i) December 31, 2020
(which is the end of the second calendar year that
begins after the issuance of the Required Amendments
List in which the change in qualification requirements
was identified), or (ii) June 29, 2021 (which is 90 days
after the close of the third regular legislative session of
the legislative body of State E that began on or after the
date of the issuance of the 2018 Required Amendments
List) to amend Plan Q, retroactively effective begin-
ning January 1, 2020, to correct the disqualifying pro-
vision in order for Plan Q to be qualified. To maintain
plan qualification, State E must also correct Plan Q's
operation to the extent necessary to reflect the correc-
tive amendment.

Example 7: Extended remedial amendment pe-
riod transition rule. Employer F maintains Plan R,
an individually designed plan. Plan R's plan year is

the calendar year. Under Rev. Proc. 2007-44, sec-
tion 9.03, Plan R's cycle is Cycle B. Employer F
submitted Plan R for a determination letter during
the Cycle B submission period for the second five-
year remedial amendment cycle (February 1, 2012 -
January 31, 2013) and received a determination letter
in July, 2014. In October 2014, Employer F adopted
a timely interim amendment, in accordance with
section 5.04 and 5.05 of Rev. Proc. 2007-44, for a
change in qualification requirements identified on
the 2013 Cumulative List of Changes (Notice 2013-
84, 2013-52 I.R.B. 82). Because Employer F ad-
opted a timely amendment for the change in quali-
fication requirements, the remedial amendment
period for the change was extended to the end of the
third Cycle B remedial amendment cycle (January
31, 2018) pursuant to section 5.03 of Rev. Proc.
2007-44.

On January 1, 2017, the five-year remedial
amendment cycle system will be eliminated. As a
result, the remedial amendment period under Rev.
Proc. 2007-44 for the change in qualification re-
quirements for Plan R would not extend beyond
December 31, 2016. However, pursuant to the ex-
tended remedial amendment period transition rule in
section 6 of this revenue procedure, the expiration of
the remedial amendment period is extended to De-
cember 31, 2017, with respect to any disqualifying
provision for which, as of January 1, 2017, the
remedial amendment period (as extended by Rev.
Proc. 2007-44) has not expired. Thus, Plan R's
extended remedial amendment period for the change
in qualification requirements identified on the 2013
Cumulative List will expire December 31, 2017.

## SECTION 12. SCOPE OF PLAN REVIEW

With respect to individually designed
plans for which a determination letter ap-
plication is submitted, the IRS review will
be based on the Required Amendments
List that was issued during the second
calendar year preceding the submission of
the determination letter application. For
example, with respect to a plan submitted
for a determination letter during the cal-
endar year beginning January 1, 2020, the
IRS's review will be based on the Re-
quired Amendments List that was issued
in 2018, regardless of the fact that the plan
otherwise would not be required to be
amended for items on the 2018 Required
Amendments List until December 31,
2020. The review will also take into ac-
count all previously issued Required
Amendments Lists (and Cumulative Lists
issued prior to 2016). Terminating plans
will be reviewed for amendments required
to be adopted in connection with plan
termination (see section 7 of this revenue
procedure). Plans submitted for initial
qualification during the 2017 calendar

year will be reviewed based on the 2015
Cumulative List (Notice 2015-84). With
the exception of a terminating plan, an
individually designed plan must be re-
stated to incorporate all previously ad-
opted amendments into the plan document
when a determination letter application is
submitted.

# SECTION 13. RELIANCE ON DETERMINATION LETTERS

.01 Rev. Proc. 2016-6 provides that,
effective as of January 4, 2016, determi-
nation letters issued to individually de-
signed plans will no longer contain an
expiration date.

.02 Under this revenue procedure, ex-
piration dates included in determination
letters issued prior to January 4, 2016, are
no longer operative.

.03 In general, a plan sponsor that
maintains a qualified plan for which a
favorable determination letter has been is-
sued and that is otherwise entitled to rely
on the determination letter may not con-
tinue to rely on the determination letter
with respect to a plan provision that is
subsequently amended or that is subse-
quently affected by a change in law. How-
ever, a plan sponsor may continue to rely
on a determination letter with respect to
plan provisions that are not amended or
affected by a change in law. Reliance on
determination letters is discussed in sec-
tion 13 of Rev. Proc. 2016-4, 2016-1
I.R.B. 142 (updated annually) and section
21.01 of Rev. Proc. 2016-6, 2016-1
I.R.B. 200 (updated annually).

# PART III - PRE-APPROVED PLANS

## SECTION 14. SIX-YEAR REMEDIAL AMENDMENT CYCLE SYSTEM FOR PRE-APPROVED PLANS

.01 Under this revenue procedure, ev-
ery pre-approved plan (that is, every M&P
and VS plan) generally has a regular, six-
year remedial amendment cycle. As a re-
sult, M&P sponsors and VS practitioners
(including mass submitters), as defined in
Rev. Proc. 2015-36, may apply for new
opinion or advisory letters once every six
years. Employers that adopt such pre-
approved plans generally are on the same
six-year remedial amendment cycle with
respect to their plans, and, if otherwise

eligible under section 20.03 of this reve-
nue procedure and section 8 of Rev. Proc.
2016-6 (updated annually), may apply
for determination letters once every six
years. However, pre-approved defined
contribution plans have different six-year
remedial amendment cycles than pre-
approved defined benefit plans. Thus, the
same six-year remedial amendment cycle
applies with respect to all pre-approved
defined contribution plans, and a separate
six-year remedial amendment cycle ap-
plies with respect to all pre-approved de-
fined benefit plans.

.02 M&P sponsors and VS practitio-
ners generally have until January 31st of
the calendar year following the opening of
the six-year remedial amendment cycle to
submit applications for opinion and advi-
sory letters. In addition, generally, the
deadline for word-for-word identical
adopters and minor modifier placeholder
applications is January 31st of the calen-
dar year following the opening of the six-
year remedial amendment cycle (see sec-
tion 12 of Rev. Proc. 2015-36 for more
details). However, see section 16 of this
revenue procedure, which modifies the
dates of the submission period for pre-
approved defined contribution plans dur-
ing the third six-year remedial amendment
cycle.

.03 When the review of a cycle for
pre-approved plans has neared completion
(after approximately a two-year review
process), the IRS intends to announce the
date by which adopting employers must
adopt the newly approved plans. This is
expected to be a uniform date that will
apply to all adopting employers. Depend-
ing upon the length of the review process,
it is expected that this deadline will pro-
vide virtually all employers approxi-
mately a two-year window to adopt their
updated plans. An employer that adopts
the approved M&P or VS plan by the
announced deadline will have adopted the
plan within the employer's six-year reme-
dial amendment cycle. The announced
deadline will be the end of the plan's
remedial amendment cycle for all disqual-
ifying provisions for which the remedial
amendment period would otherwise end
during the cycle. For purposes of this rev-

enue procedure, an adopting employer
means an employer that satisfies the re-
quirements described in section 19 of this
revenue procedure.

## SECTION 15. EXTENSION OF THE REMEDIAL AMENDMENT PERIOD AND DEADLINES FOR THE ADOPTION OF INTERIM AND DISCRETIONARY PLAN AMENDMENTS FOR PRE- APPROVED PLANS

.01 To promote compliance during the
six-year remedial amendment cycle with
statutory or regulatory changes with re-
spect to plan qualification requirements
that will affect provisions of the written
plan document, the adoption of an interim
amendment generally will be required.

.02 An amendment with respect to a
disqualifying provision described in sec-
tion 5.03 of this revenue procedure (that
is, a disqualifying provision that results in
the failure of the plan to satisfy the qual-
ification requirements of the Code by rea-
son of a change in those requirements that
is effective after December 31, 2001,2 or
that is integral to such disqualifying pro-
vision) is referred to as an interim amend-
ment for purposes of this revenue proce-
dure.

.03 Except as otherwise provided by
statute, or in regulations or other guidance
published in the Internal Revenue Bulle-
tin, the remedial amendment period for
the disqualifying provisions described in
this section 15.03 is extended as follows:

(1) The remedial amendment period
for any disqualifying provision described
in § 1.401(b)-1(b)(1) that would other-
wise apply under § 1.401(b)-1 is extended
to the end of the applicable remedial
amendment cycle described in section 16
that includes the date on which the reme-
dial amendment period would otherwise
end if the disqualifying provision was a
provision of, or absence of a provision
from, a new plan and the plan was in-
tended, in good faith, to be qualified. The
same extension of the remedial amend-
ment period applies to a disqualifying pro-
vision (including a disqualifying provi-
sion described in section 15.02) in the
case of an adoption of an amendment to

an existing plan (without regard to
whether that amendment was required to
be adopted) if the amendment was ad-
opted timely and in good faith with the
intent of maintaining the qualified status
of the plan. However, the remedial
amendment period for a disqualifying pro-
vision will not end before the last day of a
plan's first applicable remedial amend-
ment cycle in which an application for an
opinion or advisory letter that considers
the disqualifying provision may be sub-
mitted. The IRS will make the final deter-
mination in all cases as to whether a new
plan or an amendment to an existing plan
was adopted with the good faith intention
of being qualified or maintaining qualified
status.

(2) In addition, the extension of the
remedial amendment period described in
section 15.03(1) applies to a disqualifying
provision described in section 15.02 in
cases in which the employer (or M&P
sponsor or VS practitioner, if applicable)
reasonably and in good faith determines
during the period when an interim amend-
ment to reflect a qualification change
would otherwise be required under section
15.01 that no amendment is required be-
cause the qualification change does not
impact provisions of the written plan doc-
ument. Thus, for example, if an employer
(or M&P sponsor or VS practitioner, if
applicable) makes such a determination
and the IRS finds that an amendment is
required, the plan would still be eligible
for the six-year remedial amendment cy-
cle to correct the disqualifying provisions
described in section 15.02. The IRS will
make the final determination in all cases
as to whether the determination that no
interim amendment was required was rea-
sonable and in good faith.

(3) Notwithstanding paragraphs (1)
and (2) of this section 15.03, the termina-
tion of a plan ends the plan's remedial
amendment period and, thus, generally
will shorten the remedial amendment pe-
riod for the plan.

.04 Except as otherwise provided in
sections 15.05 and 15.06 of this revenue
procedure, the deadline for the timely
adoption of an amendment for any pre-
approved plan is determined as follows:

2 As provided in section 5.01 of Rev. Proc. 2007-44, December 31, 2001, was the date after which all changes in qualification requirements were designated as disqualifying provisions by
the Commissioner in order for the changes to be eligible for the remedial amendment period available with respect to disqualifying provisions.

(1) In the case of an interim amend-
ment, an employer (or a M&P sponsor or
VS practitioner, if applicable) is consid-
ered to have timely adopted the amend-
ment if the plan amendment is adopted by
the end of the remedial amendment period
described in § 1.401(b)-1(b)(3) (deter-
mined without regard to the extension un-
der section 15.03 of this revenue proce-
dure). See section 2.07 of this revenue
procedure.

(2) In the case of a discretionary
amendment (that is, one that is not an
interim amendment described in section
15.02), an employer (or a M&P sponsor or
VS practitioner, if applicable) is consid-
ered to have adopted the amendment
timely if the plan amendment is adopted
by the end of the plan year in which the
plan amendment is operationally put into
effect. See section 8.02(1) of this revenue
procedure for examples illustrating this
deadline.

.05 Exceptions to section 15.04 amend-
ment adoption deadlines.

Section 15.04 of this revenue proce-
dure applies unless a statutory provision
or guidance issued by the IRS sets forth an
earlier deadline to timely adopt a discre-
tionary amendment with respect to a plan
year (for example, an amendment to add a
qualified cash or deferred arrangement to
a profit sharing plan cannot be adopted
retroactively) or if a statutory provision or
guidance provides another specific dead-
line for the adoption of a particular type of
interim amendment that is earlier or later
than the deadlines under section 15.04.

.06 Special deadlines for governmental
and tax exempt employers.

(1) Governmental plans.

(a) For a governmental plan within the
meaning of § 414(d), the adoption dead-
line for interim amendments is: the later
of (i) the deadline that would apply under
the rules of section 15.04(1), or (ii) 90
days after the close of the third regular
legislative session of the legislative body
with authority to amend the plan that be-
gins on or after the date the amendment
becomes effective.

(b) For a governmental plan within the
meaning of § 414(d), the adoption dead-
line for discretionary amendments is: the
later of (i) the deadline that would apply
under the rules of section 15.04(2), or (ii)
90 days after the close of the second reg-
ular legislative session of the legislative
body with authority to amend the plan that
begins on or after the date the amendment
becomes effective.

(2) Tax exempt employers. For a tax
exempt employer, the adoption deadline
for interim amendments set forth in sec-
tion 15.04(1) and 15.05 of this revenue
procedure applies, as modified in this sec-
tion 15.06(2). For purposes of determin-
ing the applicable tax filing deadline, the
following rule is used to determine the
due date (including extensions) for filing
the income tax return for the employer's
taxable year under section 2.07 of this
revenue procedure. The due date for filing
the employer's tax return in the case of a
tax exempt employer that files Form
990-T (or Form 990 or Form 990-EZ if
no Form 990-T is filed) is the later of (i)
the 15th day of the 10th month after the
end of the employer's tax year (treating
the calendar year as the tax year if the
employer does not have a tax year) or (ii)
the due date for filing the Form 990 series

(plus extensions). For this purpose, an
employer is not treated as having ob-
tained an extension of time for filing the
Form 990 series unless such extension is
actually applied for and granted. The
due date for filing the employer's tax
return in the case of a tax exempt em-
ployer that is not required to file a Form
990 series return is the 15th day of the
10th month after the end of the employ-
er's tax year (treating the calendar year
as the tax year if the employer does not
have a tax year).

.07 For purposes of this revenue pro-
cedure, a pre-approved plan restatement
that generally is effective as of a certain
date should not be treated as supersed-
ing a previously adopted interim plan
amendment that is effective before or
after the restatement's effective date and
that has not been incorporated or re-
flected in the restatement, provided that
the pre-approved plan is operated in a
manner consistent with the interim plan
amendment. A plan is presumed to be
operating in compliance with the interim
plan amendments in any case in which
the operation of the plan cannot be de-
termined.

## SECTION 16. SCHEDULES FOR THE SECOND AND THIRD SIX- YEAR REMEDIAL AMENDMENT CYCLES

.01 The table in this section 16 sets
forth the schedules for the second and
third six-year remedial amendment cycles
for pre-approved defined contribution and
defined benefit plans. Subsequent cycles
will continue on six year intervals.

Schedule(s) of Second and Third Six-Year Remedial Amendment Cycles

If the plan is -

The second six-year remedial amendment cycle began on -

And ends on -

Defined Contribution

February 1, 2011

January 31, 2017

Defined Benefit

February 1, 2013

January 31, 2019

If the plan is -

The third six-year remedial amendment cycle begins on -

And ends on -

Defined Contribution

February 1, 2017

January 31, 2023

Defined Benefit

February 1, 2019

January 31, 2025

.02 In general, sponsors of M&P plans
and practitioners maintaining VS plans
must apply for new opinion or advisory
letters for the plans every six years. The
submission period for pre-approved de-
fined contribution plans during the third
six-year remedial amendment cycle would
ordinarily begin February 1, 2017, and
end January 31, 2018 (on-cycle submis-
sion period). However, pursuant to this
section 16.02, the on-cycle submission pe-
riod for M&P sponsors and VS practitio-
ners to submit pre-approved defined con-
tribution plans for opinion or advisory
letters during the third six-year remedial
amendment cycle will begin August 1,
2017, and end July 31, 2018.

.03 If necessary, the IRS may revise the
schedules described in this section 16 to
respond to changing circumstances and
the needs of plan sponsors. The IRS will
announce any such revisions and the tim-
ing of the submission periods within each
cycle in future guidance published in the
Internal Revenue Bulletin.

## SECTION 17. CUMULATIVE LISTS OF CHANGES IN PLAN QUALIFICATION REQUIREMENTS; OPERATIONAL COMPLIANCE LIST

.01 The IRS intends to publish Cumu-
lative Lists of Changes in Plan Qualifica-
tion Requirements (Cumulative Lists) for
pre-approved plans. The Cumulative Lists
are intended to identify all changes in the
qualification requirements that are re-
quired to be taken into account in the
written plan document that is submitted to
the IRS for an opinion, advisory, or deter-
mination letter, as applicable. The IRS
currently anticipates that a Cumulative
List will be issued in the year preceding
the year in which the pre-approved de-
fined contribution plan or defined benefit
plan submission period begins. The target
date for publication of a Cumulative List
is December of such year.

.02 Each Cumulative List identifies
changes in the qualification requirements
of the Code as well as items of published
guidance relating to the plan qualification
requirements, such as regulations and rev-
enue rulings, that will be considered by
the IRS in its review of plans whose pre-
approved plan submission period begins
on the February 1st (or other date deter-

mined under section 16.02 or 16.03, as
applicable) following issuance of the Cu-
mulative List.

.03 Except as provided in the applica-
ble Cumulative List, the IRS generally
will not consider in its review of any
opinion, advisory, or determination letter
application any:

(1) guidance issued after the October 1
immediately preceding the date the appli-
cable Cumulative List is issued;

(2) statutes enacted after the October 1
immediately preceding the date the appli-
cable Cumulative List is issued;

(3) statutes that are first effective in the
year in which the submission period be-
gins for which there is no guidance iden-
tified on the applicable Cumulative List
(regardless of when they are enacted); or

(4) qualification requirements (either
statutory or regulatory) that become effec-
tive for the plan in a calendar year after
the calendar year in which the submission
period begins, regardless of when the
qualification requirements are enacted or
issued (for example, qualification require-
ments first effective in 2018, for applica-
tions submitted during the period begin-
ning August 1, 2017, based on the 2016
Cumulative List).

.04 The IRS will, however, consider in
its review of any opinion, advisory, or
determination letter application all quali-
fication requirements that are not de-
scribed in section 17.03(1) through (4) of
this revenue procedure. Thus, for exam-
ple, a determination letter may be relied
on with respect to guidance issued on or
before the October 1st preceding the issu-
ance of the applicable Cumulative List
and which is effective during the calendar
year in which the submission period be-
gins, whether or not identified on the ap-
plicable Cumulative List.

In addition, in the case of a terminating
plan, any retroactive remedial plan
amendments or other required plan
amendments (that is, plan amendments re-
quired to be adopted to reflect qualifica-
tion requirements that apply as of the date
of termination) must be adopted in con-
nection with the plan termination regard-
less of whether such requirements are in-
cluded on an applicable Cumulative List.

.05 The remedial amendment period
permits a plan to be amended retroactively
to comply with a change in plan qualifi-

cation requirements; however, a plan must
be operated in compliance with a change
in qualification requirements from the ef-
fective date of the change. To assist plan
sponsors in achieving operational compli-
ance, the IRS intends to provide annually
an Operational Compliance List to iden-
tify changes in qualification requirements
that are effective during a calendar year.
In order to be qualified, however, a plan
must comply operationally with each rel-
evant qualification requirement, even if
the requirement is not included on an Op-
erational Compliance List.

## SECTION 18. EXTENSION OF DEADLINE FOR AN EMPLOYER TO ADOPT A NEWLY APPROVED PRE-APPROVED DEFINED CONTRIBUTION PLAN AND TO APPLY FOR A DETERMINATION LETTER (IF APPLICABLE)

.01 Consistent with Notice 2016-03,
except as provided in section 18.02 of this
revenue procedure, the deadline for an
employer to adopt a newly approved pre-
approved defined contribution plan that
was based on the 2010 Cumulative List,
and to apply for a determination letter, is
extended from April 30, 2016, to April 30,
2017, for any newly approved pre-
approved defined contribution plan ad-
opted on or after January 1, 2016. For
plans eligible for this extension, the pro-
cedures for adopting a pre-approved plan
and for filing a determination letter set
forth in Rev. Proc. 2016-6 and Rev. Proc.
2007-44 will continue to apply. Thus, for
example, in the case of an employer eli-
gible for this extension that is adopting a
newly approved pre-approved defined
contribution plan as a modification and
restatement of an individually designed
plan, the rules relating to the scope of the
determination letter program set forth in
section 4 of this revenue procedure do not
apply, and the employer is permitted, until
April 30, 2017, to file a determination
letter application for the plan on a Form
5307 (Application for Determination for
Adopters of Modified Volume Submitter
Plans) or a Form 5300 (Application for
Determination for Employee Benefit
Plan), regardless of whether the employer
had previously filed a Form 5300 with
respect to the plan.

.02 For an employer that adopted a
pre-approved defined contribution plan
prior to January 1, 2016, the deadline to
adopt a modification and restatement of
the pre-approved defined contribution
plan within the current six-year remedial
amendment cycle for defined contribution
plans and to apply for a determination
letter, if permissible, was April 30, 2016.

.03 Examples.

Examples 8 through 10 illustrate the
deadline for an employer to adopt a pre-
approved defined contribution plan and to
apply for a determination letter, if permis-
sible.

Example 8: Extended deadline for employer with
an existing individually designed plan. As of June
30, 2016, Employer A maintains Plan X, an individ-
ually designed defined contribution plan. Employer
A is considering converting Plan X into a pre-
approved defined contribution plan. Employer A has
until April 30, 2017, to adopt a newly approved
pre-approved defined contribution plan within the
current six-year remedial amendment cycle for de-
fined contribution plans and to apply for a determi-
nation letter, if permissible.

Example 9: Extended deadline for employer with
a new individually designed plan. Employer B
adopts Plan Y, an individually designed defined con-
tribution plan, on January 1, 2016. Employer B is
considering converting Plan Y into a pre-approved
defined contribution plan. Employer B has until
April 30, 2017, to adopt a newly approved pre-
approved defined contribution plan within the cur-
rent six-year remedial amendment cycle for defined
contribution plans and to apply for a determination
letter, if permissible.

Example 10: Existing deadline for employer that
adopted a pre-approved defined contribution plan
prior to January 1, 2016. On April 1, 2010, Em-
ployer C initially adopted the VS defined contribu-
tion plan of Practitioner Z, which was approved
based on the 2004 Cumulative List. On January 15,
2016, Employer C adopted the newly approved VS
defined contribution plan of Practitioner Z as a mod-
ification and restatement of Employer C's existing
VS defined contribution plan. The deadline for Em-
ployer C to apply for a determination letter, if per-
missible, was April 30, 2016. The same deadline
would apply if Employer C had adopted a plan of a
different VS practitioner.

## SECTION 19. ELIGIBILITY FOR SIX-YEAR REMEDIAL AMENDMENT CYCLE SYSTEM

.01 An employer's plan is treated as a
pre-approved plan and therefore eligible

for a six-year remedial amendment cycle
system if the employer is:

(1) a prior adopter described in section
19.02; or

(2) a new adopter described in section
19.03.

.02 An employer is a prior adopter if
the employer adopted and made effective
an existing pre-approved plan, as de-
scribed in section 19.05(1) of this revenue
procedure, during the six-year remedial
amendment cycle immediately preceding
the opening of the current six-year cycle3
, and the employer, within the announced
adoption period described in section 14.03
of this revenue procedure, either:

(1) adopts the newly approved version
of that pre-approved plan; or

(2) adopts the newly approved version
of a different pre-approved plan main-
tained by either the same M&P sponsor or
VS practitioner or a different M&P spon-
sor or VS practitioner. See section
19.05(3) of this revenue procedure for the
definition of a newly approved pre-
approved plan.

.03 An employer is a new adopter if the
employer adopts a pre-approved plan and
the employer is not a prior adopter.

.04 An employer may adopt a pre-
approved plan at any time during a six-
year remedial amendment cycle; however,
if the employer adopts an existing pre-
approved plan described in section
19.05(1) of this revenue procedure, or an
interim pre-approved plan described in
section 19.05(2) of this revenue proce-
dure, it must adopt either the newly ap-
proved version of the same plan or a
newly approved version of a different pre-
approved plan by the end of the adoption
period described in section 14.03 of this
revenue procedure (see section 19.05(3)
of this revenue procedure for the defini-
tion of a newly approved pre-approved
plan). An employer that adopts an existing
pre-approved plan or an interim pre-
approved plan, but during the adoption
period described in section 14.03 of this
revenue procedure, adopts a plan other
than a newly approved version of a pre-
approved plan, will not be treated as

adopting a pre-approved plan. In such
case, the plan remains eligible for the cur-
rent six-year remedial amendment cycle;
however, if the plan is submitted for a
determination letter (as permitted under
section 20.03 of this revenue procedure),
the plan will be reviewed on the basis of
the applicable Required Amendments List
as provided in section 12 of this revenue
procedure.

.05 For purposes of this section 19:

(1) An existing pre-approved plan is a
plan (other than a newly approved plan, as
described in section 19.05(3) of this rev-
enue procedure) that has received a valid
opinion or advisory letter for the six-year
remedial amendment cycle immediately
preceding the opening of the current six-
year remedial amendment cycle. For pur-
poses of this definition, a plan is consid-
ered an existing pre-approved plan
whether or not interim or discretionary
amendments have been integrated into the
pre-approved plan document.

(2) An interim pre-approved plan is a
plan (other than a newly approved plan)
that was not in existence in the immedi-
ately preceding six-year remedial amend-
ment cycle and that has been or will be
submitted for an opinion or advisory letter
during the current six-year remedial
amendment cycle. For purposes of this
definition, a plan is considered an interim
pre-approved plan whether or not interim
or discretionary amendments have been
integrated into the pre-approved plan.

(3) A newly approved plan is a pre-
approved plan for which an opinion or
advisory letter has been issued in the cur-
rent six-year remedial amendment cycle.4
.06 Examples.

Examples 11 through 14 illustrate an
employer's eligibility for the six-year re-
medial amendment cycle. In the following
examples, both the tax year of the em-
ployer and the plan year are the calendar
year and, except as otherwise provided,
the plan has been operated in accordance
with plan terms, including any interim and
discretionary amendments.

Example 11: Adoption of plan maintained by
different sponsor. Employer L adopted and made

3The current six year remedial amendment cycle as of the date of publication of this revenue procedure began on February 1, 2011, for defined contribution plans and February 1, 2013,
for defined benefit plans. The immediately preceding six year remedial amendment cycle ended on January 31, 2011, for defined contribution plans and January 31, 2013, for defined benefit
plans.

4See section 21 of this revenue procedure for special rules applicable to an opinion or advisory letter application for a new pre-approved plan created after the submission period for the
applicable six-year cycle.

effective Plan X on January 1, 2011. Plan X is an
existing pre-approved M&P defined contribution
plan sponsored by Sponsor M. Plan Y is also a
defined contribution M&P plan but sponsored by
Sponsor N, which timely submitted an application by
April 2, 2012 (the extended deadline to submit on-
cycle applications for opinion and advisory letters
for pre-approved defined contribution plans for the
second six-year remedial amendment cycle, as pro-
vided in Announcement 2012-3). In Announcement
2014-16, the IRS announced that May 1, 2014
through April 30, 2016 would be the two-year win-
dow for employers to adopt newly approved pre-
approved plans and file determination letters, if ap-
plicable.

Sponsor M notified Employer L that it
no longer qualified as a sponsor because it
did not have the requisite number of em-
ployers (30) reasonably expected to adopt
Plan X. Therefore, Sponsor M did not
submit a new opinion letter application for
Plan X within the six-year remedial
amendment cycle by April 2, 2012. Em-
ployer L timely adopts Plan Y of Sponsor
N within the two-year window period
(May 1, 2014 through April 30, 2016).
Employer L will be considered to be a
"prior adopter" within the meaning of sec-
tion 19.02 of this revenue procedure and is
eligible for the six-year remedial amend-
ment cycle. The result would be the same
whether Employer L switched to Plan Y
because Sponsor M did not timely submit
an application by April 2, 2012, for Plan
X, Sponsor M timely submitted an appli-
cation by April 2, 2012 but later withdrew
the application, or Employer L chose not
to retain the plan of Sponsor M for other
reasons.

Example 12: Adoption of different plan offered
by same sponsor. The facts are the same as in Ex-
ample 11 except Employer L adopts Plan Z, a dif-
ferent pre-approved M&P defined contribution plan
sponsored by Sponsor M, within the announced two-
year window period and Sponsor M timely submit-
ted an application for an opinion letter by April 2,
2012 for Plan Z. Employer L is considered to be a
prior adopter and is eligible for the six-year remedial
amendment cycle.

Example 13: Adoption of VS plan in place of
M&P plan. The facts are the same as in Example 11
except Employer L adopts Plan V, a VS defined
contribution plan instead of an approved M&P plan,
within the announced two-year window period and
the practitioner timely submitted an application
for an advisory letter for Plan V by April 2, 2012.
Employer L is considered to be a prior adopter and
is eligible for the six-year remedial amendment
cycle.

Example 14: Adoption of plan by new adopter.
Employer P has never maintained a qualified plan.
Sponsor S timely submitted an application for an
opinion letter for Plan Y, an interim pre-approved
defined contribution M&P plan (that was not in

existence in the immediately preceding six-year
remedial amendment cycle), by April 2, 2012.
Employer P adopted the interim pre-approved plan
document of Plan Y on December 15, 2012, prior
to the announced adoption period (May 1, 2014
through April 30, 2016). On March 28, 2014, the
IRS issued a favorable opinion letter for Plan Y.
Employer P adopted the newly approved version
of Plan Y on June 1, 2014, during the announced
adoption period. Employer P is a new adopter and
is eligible for the six-year remedial amendment
cycle.

## SECTION 20. EFFECT OF EMPLOYER AMENDMENTS ON SIX-YEAR REMEDIAL AMENDMENT CYCLE

.01 General rule. An employer that
amends any provision of an approved
M&P plan, including its adoption agree-
ment (other than to change the choice of
options, if the plan or adoption agree-
ment permits or contemplates such a
change), or an employer that amends
provisions of a VS plan loses reliance on
the opinion or advisory letter issued to
the M&P sponsor or VS practitioner;
however, except as provided in section
20.02 of this revenue procedure, the em-
ployer's plan will remain on the current
six-year remedial amendment cycle. The
employer's plan may be eligible for the
six-year remedial amendment cycle that
follows the current six-year remedial
amendment cycle if the employer's plan
satisfies the conditions set forth in sec-
tion 19.01 of this revenue procedure.
See section 20.03 of this revenue proce-
dure for procedures for filing a determi-
nation application to obtain continued
reliance.

.02 Ineligibility for Six-Year Remedial
Amendment Cycle. A plan is ineligible for
the six-year remedial amendment cycle if
the employer:

(1) amends an approved M&P plan,
including its adoption agreement, to incor-
porate, within one year of the date the
employer initially adopted the M&P plan,
a type of plan not allowed in the M&P
program (see section 6.03 of Rev. Proc.
2015-36); or

(2) amends an approved VS plan, in-
cluding its adoption agreement, if appli-
cable, to incorporate, within one year of
the date the employer initially adopted the
VS plan, a type of plan not allowed in the
VS program (see section 16.03 of Rev.
Proc. 2015-36).

.03 Determination letter procedures.

(1) An employer that amends a M&P
or VS plan loses reliance on the opinion or
advisory letter of the M&P or VS plan.
However, to the extent permitted in this
section 20.03(2) through (5), that em-
ployer may file a determination letter ap-
plication for the plan to obtain reliance.
See also, Rev. Proc. 2016-6, section 8.01
(updated annually).

(2) An adopting employer described in
section 20.03(1) that modifies the terms of
an approved VS plan in situations in
which the modifications are not extensive
may apply for a determination letter on
Form 5307, regardless of whether a prior
determination letter has been issued with
respect to the plan.

(3) An adopting employer described in
section 20.03(1) that makes extensive
modifications to an approved VS plan and
an adopting employer that makes any
modifications to an approved M&P plan
may apply for a determination letter on
Form 5300. An employer may submit a
determination letter application on a Form
5300 only if the application is made upon
initial qualification, plan termination, or in
other circumstances identified by the IRS.
See section 4 of this revenue procedure
and Rev. Proc. 2016-6, section 8.01
(updated annually). For this purpose, an
employer that previously filed an appli-
cation on Form 5300 or Form 5307 with
respect to the plan and was issued a
favorable determination letter is not el-
igible to file a Form 5300 for initial plan
qualification.

(4) Subject to section 20.03(5), an
adopting employer described in section
20.03(2) or (3) that files a determination
letter application for the plan must file the
application within the announced adop-
tion period described in section 14.03 of
this revenue procedure. In such case, the
employer's plan is reviewed using the Cu-
mulative List that was used to review the
underlying pre-approved plan.

(5) Section 24.03 of Rev. Proc.
2015-36 provides that, due to the nature
and extent of employer amendments made
to an approved M&P or VS plan, the IRS
may, in its discretion, treat the plan as
individually designed. In such case, al-
though the plan remains eligible for the
six-year remedial amendment cycle until
the expiration of the current remedial

amendment cycle in accordance with sec-
tion 20.01 of this revenue procedure, the
employer's plan is, in other respects,
treated as an individually designed plan.
Thus, for example, the IRS reviews the
plan using the Required Amendments List
that was issued during the second calendar
year preceding the submission of the de-
termination letter application, in accor-
dance with section 12 of this revenue pro-
cedure.

(6) Determination letter filing proce-
dures are set forth in Rev. Proc. 2016-6,
which will be updated annually.

(7) While it is expected that an M&P
sponsor and a VS practitioner, if applica-
ble, generally will continue to amend on
behalf of the adopting employer even if
the adopting employer adopts amend-
ments to the plan, the sponsor or practi-
tioner no longer has the authority to
amend on behalf of the employer if the
amendment falls into one of the categories
listed in section 6.03 or section 16.03 of
Rev. Proc. 2015-36 or the IRS has exer-
cised its authority under section 24.03 of
Rev. Proc. 2015-36.

.04 Examples.

Examples 15 through 17 illustrate how
different types of employer amendments
to a pre-approved plan affect an employ-
er's eligibility for the six-year remedial
amendment cycle and which applicable
list (either the Cumulative List or the Re-
quired Amendments List) the IRS will use
to review an employer's submission. In
the following examples, both the tax year
of the employer and the plan year are the
calendar year and, except as otherwise
provided, the plan has been operated in
accordance with the plan terms, including
any interim and discretionary amend-
ments.

Example 15: Eligibility for six-year remedial
amendment cycle after minor modifications. Em-
ployer X has maintained Plan M, an approved VS
plan, since 2002. Employer X never received an
individual determination letter for Plan M. Plan M
is timely submitted for the third six-year remedial
amendment cycle by the VS practitioner. During
the third six-year remedial amendment cycle, Em-
ployer X makes minor modifications to Plan M.
Pursuant to section 20.01 and 20.03, Plan M is
eligible to remain on the six-year remedial amend-
ment cycle and may be submitted for a determi-
nation letter application on a Form 5307 by the
end of the adoption period described in section
14.03 of this revenue procedure. The IRS will
review the determination letter application based

upon the Cumulative List that was used to review
the underlying VS plan.

Example 16: Eligibility for six-year remedial
amendment cycle if plan amendments are not minor.
The facts are the same as in Example 15, except that
during the third six-year remedial amendment cycle,
Employer X modifies Plan M to the extent that the
plan is not eligible to be submitted on a Form 5307,
in accordance with section 8.01(2) of Rev. Proc.
2016-6. Because Employer X has never received
an individual determination letter for Plan M, pur-
suant to section 20.03(3) of this revenue proce-
dure, Employer X may submit a Form 5300 deter-
mination letter application for initial plan
qualification for Plan M. Employer X must submit
the determination letter application for Plan M by
the end of the adoption period described in section
14.03 of this revenue procedure. Plan M remains
eligible for the third six-year remedial amendment
cycle as described in section 20.01. The IRS will
review the plan based upon the Cumulative List
that was used to review the underlying VS plan.

Example 17: Eligibility for six-year remedial
amendment cycle and applicability of Required
Amendments List. Employer Z has never maintained
a defined contribution plan and then adopts a newly
approved VS plan (Plan V); however, Employer Z
makes major modifications to the provisions of the
plan. Employer Z submits a determination letter ap-
plication on Form 5307 during the two-year window
described in section 14.03 of this revenue procedure.
Pursuant to section 24.03 of Rev. Proc. 2015-36, the
IRS, in its discretion, determines that Employer Z
has modified the provisions of the plan to such an
extent that Plan V is considered an individually
designed plan. In accordance with section 20.01 of
this revenue procedure, Plan V remains eligible
for the third six-year remedial amendment cycle.
Employer Z may submit Plan V for a determina-
tion letter for initial qualification on Form 5300.
Consistent with section 12 of this revenue proce-
dure, the IRS will use the Required Amendments
List that was issued during the second calendar
year preceding the submission of a determination
letter application in its review of the determination
letter submission for Plan V. The review will also
take into account all previously issued Required
Amendments Lists (and Cumulative Lists issued
prior to 2016). The result in this example would be
the same if Employer Z had amended Plan V to
incorporate a type of plan provision not permitted
in the VS program more than one year after Em-
ployer Z initially adopted Plan V (see section
16.03 of Rev. Proc. 2015-36).

## SECTION 21. OFF-CYCLE FILING

.01 An application for an opinion or
advisory letter for a plan that is word-for-
word identical to an approved mass sub-
mitter that has a current advisory or
opinion letter is not treated as off-cycle
merely because it is submitted after the
end of the applicable on-cycle submis-
sion period for the six-year remedial
amendment cycle. Any other application
for an opinion or advisory letter that is

submitted after the applicable on-cycle
submission period for the six-year reme-
dial amendment cycle is treated as an
off-cycle filing. If such an off-cycle ap-
plication is submitted before the begin-
ning of the two-year window for em-
ployer adoption announced by the IRS
for an applicable six-year cycle (as de-
scribed in section 14.03 of this revenue
procedure), the IRS generally will not
review the application until it has re-
viewed and processed all on-cycle
plans. However, the IRS may, in its
discretion, determine whether the pro-
cessing of off-cycle filings may be pri-
oritized and accelerated under certain
circumstances. Off-cycle applications
that are submitted during or after the
two-year window will not be accepted.

.02 As described in section 14.03 of
this revenue procedure, the IRS intends to
publish an announcement providing the
date by which adopting employers must
adopt the newly approved plans when the
review of a cycle for pre-approved plans
has neared completion. Depending on the
length of the review process, it is expected
that this date will provide virtually all
employers approximately a two-year win-
dow to adopt the newly approved plans.
However, the adoption period for employ-
ers to adopt such newly approved plans
may be shorter than this approximate two-
year window, depending on when the IRS
finishes the review and approves such
plans. In any event, for adopting employ-
ers of such newly approved plans to be
eligible for the applicable six-year reme-
dial amendment cycle, M&P sponsors or
VS practitioners filing off cycle must sub-
mit new pre-approved plans prior to the
beginning of such announced adoption pe-
riod, to give the IRS time to review such
plans and to provide time for adopting
employers to adopt such plans.

.03 Adopting employers must adopt
such newly approved plans within the
adoption period described in section 14.03
of this revenue procedure and, if eligible
to submit for a determination letter pursu-
ant to section 20.03 of this revenue pro-
cedure, may file a Form 5307 or Form
5300 as appropriate.

PART IV - EFFECT ON OTHER DOCUMENTS, EFFECT ON OTHER

.02 Sections 2.07 and 24.03 of Rev. Proc. 2015-36 are modified. .03 Sections I and III of Notice 2015-84 are modified.

DRAFTING INFORMATION The principal author of this revenue procedure is Angelique Carrington of the Office of Associate Chief Counsel (Tax

LAWS, EFFECTIVE DATE, DRAFTING INFORMATION SECTION 22. EFFECT ON OTHER

DOCUMENTS

SECTION 23. EFFECTIVE DATE

Exempt and Government Entities). For further information regarding this revenue

.01 Rev. Proc. 2007-44 is clarified, modified, and superseded.

This revenue procedure is effective January 1, 2017.

procedure, contact Ms. Carrington at (202) 317-4148 (not a toll-free number).

# 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
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the 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 with
modified, below).

Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.

Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.

Modified is 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
with amplified and clarified, above).

Obsoleted describes 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.

Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.

Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-

stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes 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
published ruling is first modified and then,
as modified, is superseded.

Supplemented is 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
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.

Suspended is 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 following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign corporation.

G.C.M .- Chief Counsel's Memorandum.

GE-Grantee.

GP-General Partner.

TFR-Transferor.

CI-City.

GR-Grantor.

T.I.R .- Technical Information Release.

TP-Taxpayer.

Ct.D .- Court Decision.

I.R.B .- Internal Revenue Bulletin.

TR-Trust.

CY-County.

LE-Lessee.

TT-Trustee.

D-Decedent.

LP-Limited Partner.

U.S.C .- United States Code.

DC-Dummy Corporation.

LR-Lessor.

X-Corporation.

DE-Donee.

Del. Order-Delegation Order.

Nonacq .- Nonacquiescence.

O Organization.

DR-Donor.

P-Parent Corporation.

PHC-Personal Holding Company.

PO-Possession of the U.S.

PR-Partner.

PRS-Partnership.

PTE-Prohibited Transaction Exemption.
Pub. L .- Public Law.

REIT-Real Estate Investment Trust.

Rev. Proc .- Revenue Procedure.

Rev. Rul .- Revenue Ruling.

S-Subsidiary.

S.P.R .- Statement of Procedural Rules.

Stat .- Statutes at Large.

BK-Bank.

B.T.A .- Board of Tax Appeals.

T.C .- Tax Court.

C-Individual.

T.D .- Treasury Decision.

C.B .- Cumulative Bulletin.

TFE-Transferee.

CFR-Code of Federal Regulations.

COOP-Cooperative.

IC-Insurance Company.

M-Minor.

Y-Corporation.

Z-Corporation.

DISC-Domestic International Sales Corporation.

E-Estate.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

ERISA-Employee Retirement Income Security Act.
EX-Executor.

F-Fiduciary.

FC-Foreign Country.

FICA-Federal Insurance Contributions Act.

FISC-Foreign International Sales Company.

FPH-Foreign Personal Holding Company.

T-Target Corporation.

## Numerical Finding List1

Bulletin 2016-27 through 2016-29

Action on Decision:

2016-01, 2016-16 I.R.B. 580

Announcements:

2016-21, 2016-27 I.R.B. 8
2016-23, 2016-27 I.R.B. 10

Notices:

2016-40, 2016-27 I.R.B. 4

2016-41, 2016-27 I.R.B. 5

2016-42, 2016-29 I.R.B. 67

2016-43, 2016-29 I.R.B. 132

2016-44, 2016-29 I.R.B. 132

2016-45, 2016-29 I.R.B. 135

Proposed Regulations:

REG-123854-12, 2016-28 I.R.B. 15
REG-147196-07, 2016-28 I.R.B. 32

Revenue Procedures:

2016-37, 2016-29 I.R.B. 136

Revenue Rulings:

2016-17, 2016-27 I.R.B. 1

Treasury Decisions:

9773, 2016-29 I.R.B. 56

## Finding List of Current Actions on Previously Published Items1

Bulletin 2016-27 through 2016-29

Notices:

2013-1
Modified by
Notice 2016-41, 2016-27 I.R.B. 5

2013-1
Superseded by
Notice 2016-41, 2016-27 I.R.B. 5

### Revenue Procedures:

2007-44
Clarified by
Rev. Proc. 2016-37, 2016-29 I.R.B. 136

2007-44
Modified by
Rev. Proc. 2016-37, 2016-29 I.R.B. 136

2007-44
Superseded by
Rev. Proc. 2016-37, 2016-29 I.R.B. 136

2015-36
Modified by
Rev. Proc. 2016-37, 2016-29 I.R.B. 136

# Internal Revenue Service Washington, DC 20224

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