26 U.S.C. § 1471 — Withholdable payments to foreign financial institutions

(a) In general In the case of any withholdable payment^* to a foreign financial institution which does not meet the requirements of subsection (b), the withholding agent^* about that payment must deduct and withhold from that payment a tax equal to 30 percent of the amount of that payment. (b) Reporting requirements, etc. (1) In general The requirements of this subsection are met about any foreign financial institution if an agreement is in effect between that institution and the Secretary^* under which that institution agrees— (A) to obtain that information regarding each holder of each account maintained by that institution as is necessary to determine which (if any) of that accounts are United States accounts, (B) to comply with that verification and due diligence procedures as the Secretary may require about the identification of United States accounts, (C) in the case of any United States account maintained by that institution, to report on an annual basis the information described in subsection (c) about that account, (D) to deduct and withhold a tax equal to 30 percent of— (i) any passthru payment which is made by that institution to a recalcitrant account holder or another foreign financial institution which does not meet the requirements of this subsection, and (ii) in the case of any passthru payment which is made by that institution to a foreign financial institution which has in effect an election under paragraph (3) about that payment, so much of that payment as is allocable to accounts held by recalcitrant account holders or foreign financial institutions which do not meet the requirements of this subsection, (E) to comply with requests by the Secretary for additional information about any United States account maintained by that institution, and (F) in any case in which any foreign law would (but for a waiver described in clause (i)) prevent the reporting of any information referred to in this subsection or subsection (c) about any United States account maintained by that institution— (i) to attempt to obtain a valid and effective waiver of that law from each holder of that account, and (ii) if a waiver described in clause (i) is not obtained from each that holder within a reasonable period of time, to close that account. Any agreement entered into under this subsection may be terminated by the Secretary upon a determination by the Secretary that the foreign financial institution is out of compliance with that agreement. (2) Financial institutions deemed to meet requirements in certain cases A foreign financial institution may be treated by the Secretary as meeting the requirements of this subsection if— (A) that institution— (i) complies with that procedures as the Secretary may prescribe to ensure that that institution does not maintain United States accounts, and (ii) meets that other requirements as the Secretary may prescribe about accounts of other foreign financial institutions maintained by that institution, or (B) that institution is a member of a class of institutions about which the Secretary has determined that the application of this section is not necessary to carry out the purposes of this section. (3) Election to be withheld upon rather than withhold on payments to recalcitrant account holders and nonparticipating foreign financial institutions In the case of a foreign financial institution which meets the requirements of this subsection and that other requirements as the Secretary may provide and which elects the application of this paragraph— (A) the requirements of paragraph (1)(D) must not apply, (B) the withholding tax imposed under subsection (a) must apply about any withholdable payment to that institution to the extent that payment is allocable to accounts held by recalcitrant account holders or foreign financial institutions which do not meet the requirements of this subsection, and (C) the agreement described in paragraph (1) must— (i) require that institution to notify the withholding agent about each that payment of the institution’s election under this paragraph and that other information as may be necessary for the withholding agent to determine the appropriate amount to deduct and withhold from that payment, and (ii) include a waiver of any right under any treaty of the United States about any amount deducted and withheld pursuant to an election under this paragraph. To the extent provided by the Secretary, the election under this paragraph may be made about certain classes or types of accounts of the foreign financial institution. (c) Information required to be reported on United States accounts (1) In general The agreement described in subsection (b) must require the foreign financial institution to report the following about each United States account maintained by that institution: (A) The name, address, and TIN^* of each account holder which is a specified United States person^* and, in the case of any account holder which is a United States owned foreign entity^*, the name, address, and TIN of each substantial United States owner^* of that entity. (B) The account number. (C) The account balance or value (determined at that time and in that manner as the Secretary may provide). (D) Except to the extent provided by the Secretary, the gross receipts and gross withdrawals or payments from the account (determined for that period and in that manner as the Secretary may provide). (2) Election to be subject to same reporting as United States financial institutions In the case of a foreign financial institution which elects the application of this paragraph— (A) subparagraphs (C) and (D) of paragraph (1) must not apply, and (B) the agreement described in subsection (b) must require that foreign financial institution to report that information about each United States account maintained by that institution as that institution would be required to report under sections 6041, 6042, 6045, and 6049 if— (i) that institution were a United States person^*, and (ii) each holder of that account which is a specified United States person or United States owned foreign entity were a natural person and citizen of the United States. An election under this paragraph must be made at that time, in that manner, and subject to that conditions as the Secretary may provide. (3) Separate requirements for qualified intermediaries In the case of a foreign financial institution which is treated as a qualified intermediary by the Secretary for section 1441 and the regulations issued under it, the requirements of this section must be in addition to any reporting or other requirements imposed by the Secretary for that treatment. (d) Definitions for this section— (1) United States account (A) In general The term “United States account” means any financial account which is held by one or more specified United States persons or United States owned foreign entities. (B) Exception for certain accounts held by individuals Unless the foreign financial institution elects to not have this subparagraph apply, that term must not include any depository account maintained by that financial institution if— (i) each holder of that account is a natural person, and (ii) about each holder of that account, the aggregate value of all depository accounts held (in whole or in part) by that holder and maintained by the same financial institution which maintains that account does not exceed $50,000. To the extent provided by the Secretary, financial institutions which are members of the same expanded affiliated group must be treated for clause (ii) as a single financial institution. (C) Elimination of duplicative reporting requirements that term must not include any financial account in a foreign financial institution if— (i) that account is held by another financial institution which meets the requirements of subsection (b), or (ii) the holder of that account is otherwise subject to information reporting requirements which the Secretary determines would make the reporting required by this section about United States accounts duplicative. (2) Financial account Except as otherwise provided by the Secretary, the term “financial account” means, about any financial institution— (A) any depository account maintained by that financial institution, (B) any custodial account maintained by that financial institution, and (C) any equity or debt interest in that financial institution (other than interests which are regularly traded on an established securities market). Any equity or debt interest which constitutes a financial account under subparagraph (C) about any financial institution must be treated for this section as maintained by that financial institution. (3) United States owned foreign entity The term “United States owned foreign entity” means any foreign entity which has one or more substantial United States owners. (4) Foreign financial institution The term “foreign financial institution” means any financial institution which is a foreign entity. Except as otherwise provided by the Secretary, that term must not include a financial institution which is organized under the laws of any possession of the United States. (5) Financial institution Except as otherwise provided by the Secretary, the term “financial institution” means any entity that— (A) accepts deposits in the ordinary course of a banking or similar business, (B) as a substantial portion of its business, holds financial assets for the account of others, or (C) is engaged (or holding itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securities (as defined in section 475(c)(2) without regard to the last sentence of it), partnership^* interests, commodities (as defined in section 475(e)(2)), or any interest (including a futures or forward contract or option) in that securities, partnership interests, or commodities. (6) Recalcitrant account holder The term “recalcitrant account holder” means any account holder which— (A) fails to comply with reasonable requests for the information referred to in subsection (b)(1)(A) or (c)(1)(A), or (B) fails to provide a waiver described in subsection (b)(1)(F) upon request. (7) Passthru payment The term “passthru payment” means any withholdable payment or other payment to the extent attributable to a withholdable payment. (e) Affiliated groups (1) In general The requirements of subsections (b) and (c)(1) must apply— (A) about United States accounts maintained by the foreign financial institution, and (B) except as otherwise provided by the Secretary, about United States accounts maintained by each other foreign financial institution (other than any foreign financial institution which meets the requirements of subsection (b)) which is a member of the same expanded affiliated group as that foreign financial institution. (2) Expanded affiliated group for this section, the term “expanded affiliated group” means an affiliated group as defined in section 1504(a), determined— (A) by substituting “more than 50 percent” for “at least 80 percent” each place it appears, and (B) without regard to paragraphs (2) and (3) of section 1504(b). A partnership or any other entity (other than a corporation^*) must be treated as a member of an expanded affiliated group if that entity is controlled (within the meaning of section 954(d)(3)) by members of that group (including any entity treated as a member of that group by reason of this sentence). (f) Exception for certain payments Subsection (a) must not apply to any payment to the extent that the beneficial owner of that payment is— (1) any foreign government, any political subdivision of a foreign government, or any wholly owned agency or instrumentality of any one or more of the foregoing, (2) any international organization^* or any wholly owned agency or instrumentality of it, (3) any foreign central bank of issue, or (4) any other class of persons identified by the Secretary for this subsection as posing a low risk of tax evasion.