Announcement 2001-55

Part IV. Items of General Interest
New Revision of Publication
538, Accounting Periods and
Methods
Announcement 2001–54
Publication 538, revised April 2001,
will be available soon from the Internal
Revenue Service. It replaces the April
1999 revision.
This publication provides information
on how to determine the appropriate
accounting year and accounting method
for your business.
You can get a copy of this publication by
calling 1-800-TAX-FORM (1-800-8293676). You can also write to the IRS Forms
Distribution Center nearest you. Check
your income tax package for the address.
The publication is also available on the IRS
Internet web site at www.irs.gov.

Revisions to Regulations
Relating to Withholding of Tax
on Certain U.S. Source Income
Paid to Foreign Persons and
Revisions of Information
Reporting Regulations;
Correction
Announcement 2001–55
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correction to final regulations.
SUMMARY: This document contains corrections to final regulations (T.D. 8881,
2000–23 I.R.B. 1158) which were published in the Federal Register on
Monday, May 22, 2000 (65 FR 32152).
The final regulations relate to withholding
of tax on certain U.S. source income paid
to foreign persons and related requirements governing the collection, deposit,
refunds, and credits of withheld amounts
under sections 1461 through 1463.
DATES: This correction is effective
January 1, 2001.
FOR FURTHER INFORMATION CONTACT: Carl Cooper, Laurie Hatten-Boyd,
or Kate Hwa (202) 622-3840 (not a tollfree number).
SUPPLEMENTARY INFORMATION:

May 21, 2001

Background
The final regulations that are subject to
these corrections are under section 1441
of the Internal Revenue Code.
Need for Correction
As published, final regulations (T.D.
8881) contain errors that may prove to be
misleading and are in need of clarification.
Correction of Publication
Accordingly, the publication of final
regulations (T.D. 8881), which were the
subject of FR Doc. 00-11937, is corrected
as follows:
§1.1441–1 [Corrected]
1. On page 32174, columns 1 and 2,
§1.1441(b)(3)(ii)(C) is corrected to read
as follows:
§1.1441–1 Requirement for the deduction
and withholding of tax on payments to
foreign persons.
* * * * *
(b) * * *
(3) * * *
(ii) * * *
(C) Documentary evidence furnished
for offshore account. If the withholding
agent receives valid documentary evidence, as described in §1.6049–5(c)(1) or
(4), with respect to an offshore account
from an entity but the documentary evidence does not establish the entity’s classification as a corporation , trust, estate, or
partnership, the withholding agent may
presume (in the absence of actual knowledge otherwise) that the entity is the type
of person enumerated under §1.6049–4
(c)(1)(ii)(B) through (Q) if it can be so
treated under any one of those paragraphs
without the need to furnish documentation. If the withholding agent cannot treat
a payee as a person described in
§1.6049–4(c)(1)(ii)(B) through (Q), then
the payee shall be presumed to be a corporation unless the withholding agent
knows, or has reason to know, that the
entity is not classified as a corporation for
U.S. tax purposes. If a payee is, or is presumed to be, a corporation under this
paragraph (b)(3)(ii)(C) and a foreign per-

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son under paragraph (b)(3)(iii) of this section, a withholding agent shall not treat
the payee as the beneficial owner of
income if the withholding agent knows, or
has reason to know, that the payee is not
the beneficial owner of the income. For
this purpose, a withholding agent shall
have reason to know that the payee is not
a beneficial owner if the documentary evidence indicates that the payee is a bank,
broker, intermediary, custodian, or other
agent, or is treated under §1.6049–4(c)
(1)(ii)(B) through (Q) as such a person. A
withholding agent may, however, treat
such a person as a beneficial owner if the
foreign person provides a statement, in
writing and signed by a person with
authority to sign the statement, that is
attached to the documentary evidence
stating it is the beneficial owner of the
income.
* * * * *
2. On page 32175, column 2,
§1.1441–1(b)(3)(vi), line 5, the language
“this section that has not agreed to be” is
corrected to read “this section that has
provided a withholding certificate as
described in paragraph (e)(3)(v) of this
section on which it has not agreed to be”.
3. On page 32175, column 2,
§1.1441–1(b)(3)(vii)(B), line 9, the language “defined in §1.6059–5(e)) to an offshore” is corrected to read “defined in
§1.6049–5(e)) to an offshore”.
4. On page 32176, column 3,
§1.1441–1(c)(14), line 3, the language
“intermediary that is not a qualified” is
corrected to read “intermediary that is not
a U.S. person and not a qualified”.
5. On page 32179, column 1,
§1.1441–1(e)(3)(iii)(D), line 7, the language “(e)(3)(iii) or paragraph (e)(3)(iv)
of this” is corrected to read “(e)(3)(iii) or
paragraph (e)(5)(iv) of this”.
6. On page 32180, column 1,
§1.1441–1(e)(3)(iv)(C)(1), line 8, the language “intermediary to the withholding
agent” is corrected to read “intermediary
and provided to the withholding agent”.
7. On page 32180, column 2,
§1.1441–1(e)(3)(iv)(C)(2), line 5 from the
top of the column, the language “person),
the withholding certificate” is corrected to
read “person), the withholding statement”.
8. On page 32180, column 3,
§1.1441–1(e)(3)(iv)(D)(2), line 3, the lan-

2001–21 I.R.B.

guage “(e)(3)(iv)(B)(2) of this section
allocating” is corrected to read
“(e)(3)(iv)(C)(2) of this section allocating”.
9. On page 32180, column 3,
§1.1441–1(e)(3)(iv)(D)(2), line 11, the
language “(e)(3)(iv)(B) of this section.
Further, each” is corrected to read
“(e)(3)(iv)(C) of this section. Further,
each”.
10. On page 32180, column 3,
§1.1441–1(e)(3)(iv)(D)(2), line 25, the
language “(e)(3)(iv)(B) of this section
(other than” is corrected to read
“(e)(3)(iv)(C) of this section (other than”.
11. On page 32181, column 1,
§1.1441–1(e)(3)(iv)(D)(3), line 6, the language “payee (including U.S. nonexempt” is corrected to read “payee
(including U.S. exempt”.
12. On page 32186, columns 1 and 2,
§1.1441–1(e)(5)(v)(C)(2), is corrected to
read as follows:

provide such information will result in the
application of penalties to the qualified
intermediary under sections 6721 and
6722, as well as any other applicable
penalties, and may result in the termination of the qualified intermediary’s withholding agreement with the IRS. A withholding agent shall not be liable for tax,
interest, or penalties for failure to backup
withhold or report information under
chapter 61 of the Internal Revenue Code
due solely to the errors or omissions of the
qualified intermediary. If a qualified
intermediary fails to provide the allocation information required by this paragraph (e)(5)(v)(C)(2), with respect to U.S.
non-exempt recipients, the withholding
agent shall report the unallocated amount
paid from the withholding rate pool to an
unknown recipient, or otherwise in accordance with the appropriate Form 1099 and
the instructions accompanying the form.
* * * * *

§1.1441–1 Requirement for the deduction
and withholding of tax on payments to
foreign persons.

§1.1441–5 [Corrected]

* * * * *
(e) * * *
(5) * * *
(v) * * *
(C) * * *
(2) Alternative procedure for U.S. nonexempt recipients. If permitted under its
agreement with the IRS, a qualified intermediary may, by mutual agreement with a
withholding agent, establish a single zero
withholding rate pool that includes U.S.
non-exempt recipient account holders for
whom the qualified intermediary has provided Forms W-9 prior to the withholding
agent paying any reportable payments, as
defined in the qualified intermediary
agreement, and a separate withholding
rate pool (subject to 31-percent withholding) that includes only U.S. non-exempt
recipient account holders for whom a
qualified intermediary has not provided
Forms W-9 prior to the withholding agent
paying any reportable payments. If a
qualified intermediary chooses the alternative procedure of this paragraph
(e)(5)(v)(C)(2), the qualified intermediary
must provide the information required by
its qualified intermediary agreement to
the withholding agent no later than
January 15 of the year following the year
in which the payments are paid. Failure to

2001–21 I.R.B.

12a. On page 32193, column 2,
§1.1441–5(e)(5), paragraph (e)(5)(ii) is
correctly designated paragraph (e)(5)(ii).
13. On page 32193, column 3,
§1.1441–5(e)(5)(ii), the last 2 lines of the
paragraph, the language “having to identify any partner’s distributive share of the
payment.” is corrected to read “having to
identify any beneficiary’s or grantor’s distributive share of the payment.”.
§1.1441–7 [Corrected]
14. On page 32198, columns 1 and 2,
§1.1441–7(b)(4)(i) is corrected to read as
follows:
§1.1441–7 General provisions relating to
withholding agents.
* * * * *
(b) * * *
(4) * * * (i) In general. A withholding agent has reason to know that a
beneficial owner withholding certificate
provided by a direct account holder in connection with a payment of an amount
described in §1.1441–6(c)(2) is unreliable
or incorrect if the withholding certificate is
incomplete with respect to any item on the
certificate that is relevant to the claims
made by the direct account holder, the
withholding certificate contains any information that is inconsistent with the direct

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account holder’s claim, the withholding
agent has other account information that is
inconsistent with the direct account holder’s claim, or the withholding certificate
lacks information necessary to establish
entitlement to a reduced rate of withholding. For purposes of establishing a direct
account holder’s status as a foreign person
or resident of a treaty country, a withholding certificate shall be considered unreliable or inconsistent with an account holder’s claims only if it is not reliable under
the rules of paragraphs (b)(5) and (6) of
this section. A withholding agent that
relies on an agent to review and maintain a
withholding certificate is considered to
know or have reason to know the facts
within the knowledge of the agent.
* * * * *
15. On page 32198, column 3,
§1.1441–7(b)(5)(i)(A)(1), lines 4 and 5,
the language “address) that is no more
than three years old, the documentary evidence supports” is corrected to read
“address) that has been provided within
the past three years, was valid at the time
it was provided, the documentary evidence supports”.
16. On page 32201, column 1,
§1.1441–7(b)(10)(ii), line 21, the language
“withholding certificate relates. A” is corrected to read “withholding certificate. A”.
§1.1461–1 [Corrected]
17. On page 32201, column 3,
§1.1461–1, in the section heading “Payment
and returns of tax withhold.” is corrected to
read “Payment and returns of tax withheld.”.
18. On page 32202, column 1,
§1.1461–1(c)(1)(ii)(A)(1), line 2, the language “paragraph (c)(6) of this section,” is
corrected to read “§1.1441–1(c)(6),”.
19. On page 32202, column 3,
§1.1461–1(c)(2)(i) is corrected by adding
the language “and” at the end of the last line
of paragraph (c)(2)(i)(L), removing paragraph (2)(i)(M), and correctly designating
paragraph (c)(2)(i)(N) as paragraph
(c)(2)(i)(M).
20. On page 32203, column 1,
§1.1461–1(c)(2)(ii)(H) is corrected to
read as follows:
§1.1461–1 Payment and returns of tax
withheld.
* * * * *
(c) * * *
(2) * * *

May 21, 2001

(ii) * * *
(H) Interest (including original issue
discount) paid with respect to foreign-targeted registered obligations described in
§1.871–14(e)(2) to the extent the documentation requirements described in
§1.871–14(e)(3) and (4) are required to be
satisfied (taking into account the provisions of §1.871–14(e)(4)(ii), if applicable;
* * * * *
§1.6045–1 [Corrected]
21. On page 32206, column 2,
§1.6045–1(g)(3)(iv), lines 6 and 7, the
language “broker has actual knowledge or
reason to know (within the meaning of” is
corrected to read “broker has actual
knowledge (within the meaning of”.
§1.6049–5 [Corrected]
22. On page 32207, column 3,
§1.6049–5(c)(4) introductory text, lines 2
and 3, the language “modifies the provisions of this paragraph (c) for payments to
offshore” is corrected to read “modifies
the provisions of paragraph (c)(1) of this
section for payments to offshore”.
23. On page 32208, columns 2 and 3,
§1.6049–5(d)(2)(i), is corrected to read as
follows:
§1.6049–5 Interest and original issue
discount subject to reporting after
December 31, 1982.
* * * * *
Section
* * * * *
1.6045–1(g)(1)(i), first sentence . . . . .

* * * * *
1.6049–5(b)(12), first sentence . . . . . .

(d) * * *
(2) * * * (i) In general. Except as
otherwise provided in this paragraph
(d)(2)(i), for purposes of this section
(and other sections of regulations under
this chapter to which this paragraph
(d)(2) applies), the provisions of
§1.1441–1(b)(3)(i) through (ix) and
§1.1441–5(d) and (e)(6) shall apply (by
applying the term payor instead of the
term withholding agent) to determine the
classification (e.g., individual, corporation, partnership, trust), status (i.e., a
U.S. or a foreign person), and other relevant characteristics (e.g., beneficial
owner or intermediary) of a payee if a
payment cannot be reliably associated
with valid documentation under
§1.1441–1(b)(2)(vii) irrespective of
whether the payments are subject to
withholding under chapter 3 of the
Internal Revenue Code. The provisions
of §1.1441–1(b)(3)(iii)(D) and (vii)(B)
shall not apply, however, to payments to
amounts that are not subject to withholding. The rules of §1.1441–1(b)(2)(vii)
shall apply for purposes of determining
when a payment can reliably be associated with documentation, by applying the
term payor instead of the term withholding agent. For this purpose, the documentary evidence or statement described
in paragraph (c)(4) of this section can be
treated as documentation with which a
payment can be associated.
* * * * *
Remove

24. On page 32208, column 3,
§1.6049–5(d)(2)(ii), line 11, the language
“described in §1.1441–6(c)(2) that are” is
corrected to read “described in
§1.1441–6(c)(2) (or credits an account
with broker proceeds from securities
described in §1.1441–6(c)(2)), that are”.
25. On page 32209, column 2,
§1.6049–5(d)(3)(i), line 11 from the top of
the column, the language “determine the
payees status for” is corrected to read
“determine the payee’s status for”.
26. On page 32209, column 2,
§1.6049–5(d)(3)(ii), the last line in the
paragraph, the language “an exempt
recipient.” is corrected to read “an exempt
recipient and has actual knowledge of the
amount allocable to such a person.”.
27. On page 32209, column 2,
§1.6049–5(d)(3)(iii)(A), line 13, the language “§1.1441–1(b)(3)(ii)(C) or (v)(A)
shall be” is corrected to read
“§1.1441–1(b)(3)(ii)(C),
(v)(A),
§1.1441–5(d) or (e), shall be”.
28. On page 32209, column 3,
§1.6049–5(d)(3)(iii)(B), line 4 from the
top of the column, the language “under
§1.1441–3(b)(ii)(C) or (v)(A) for” is corrected to read “as an intermediary for”.
PART 1 – [Corrected]
29. On page 32212, the table in
amendatory instruction Par. 18. is corrected by adding two entries in numerical
order to read as follows:

Add

or presumed to be made to a
foreign payee under §1.6049–
5(d)(2), (3), (4), or (5) . . . . . . . . . . . . . . . .

or presumed to be made to a foreign
payee under §1.6049–
5(d)(2) or (3) . . . . . . . . . . . . . . . .. .

or presumed to be made to a
foreign payee under paragraph
(d)(2), (3), (4), or (5) of this section . . . . .

or presumed to be made to a
foreign payee under paragraph
(d)(2) or (3) of this section . . . . . . .

* * * * *
Cynthia E. Grigsby,
Chief, Regulations Unit,
Office of Special Counsel
(Modernization & Strategic Planning).
(Filed by the Office of the Federal Register on April
5, 2001, 8:45 a.m., and published in the issue of the
Federal Register for April 6, 2001, 66 F.R. 18187)

May 21, 2001

Accounting for Long-Term
Contracts; Correction
Announcement 2001–56
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correction to final regulations.

1286

SUMMARY: This document contains
corrections to final regulations (T.D.
8929, 2001–10 I.R.B. 756) which were
published in the Federal Register on
Thursday, January 11, 2001 (66 FR 2219).
The final regulations provide guidance on
methods of accounting for long-term contracts.

2001–21 I.R.B.