Td 9751

§ 1.6045A–1T [Removed]
Par. 5. Section 1.6045A–1T is removed.
Par. 6. Section 1.6049 –10 is added to
read as follows:

John Dalrymple,
Deputy Commissioner for
Services and Enforcement.
Approved: January 13, 2016.
Mark J. Mazur,
Assistant Secretary of the
Treasury (Tax Policy).

§ 1.6049 –10 Reporting of original issue
discount on a tax-exempt obligation.
(a) In general. For purposes of section
6049, a payor (as defined in § 1.6049 –
4(a)(2)) of original issue discount (OID)
on a tax-exempt obligation (as defined in
section 1288(b)(2)) is required to report
the daily portions of OID on the obligation as if the daily portions of OID that
accrued during a calendar year were paid
to the holder (or holders) of the obligation
in the calendar year. The amount of the
daily portions of OID that accrues during
a calendar year is determined as if section
1272 and § 1.1272–1 applied to a taxexempt obligation. Notwithstanding any
other rule in section 6049 and the regulations thereunder, a payor must determine
whether a tax-exempt obligation was issued with OID and the amount of OID
that accrues for each relevant period. As
prescribed by section 1288(b)(1), OID on
a tax-exempt obligation is determined
without regard to the de minimis rules in
section 1273(a)(3) and § 1.1273–1(d).
(b) Acquisition premium. A payor is
required to report acquisition premium
amortization on a tax-exempt obligation in
accordance with the rules in § 1.6049 –9(c)
as if section 1272 applied to a tax-exempt
obligation. See paragraph (a) of this section
to determine the amount of OID allocable to
an accrual period.
(c) Effective/applicability date. This
section applies to a tax-exempt obligation
that is a covered security (within the
meaning of § 1.6045–1(a)(15) and
(n)(12)) acquired on or after January 1,
2017. For a taxable year beginning after
December 31, 2016, a broker, however,
may rely on this section to report OID and
acquisition premium for a tax-exempt obligation that is a covered security acquired
before January 1, 2017.

(Filed by the Office of the Federal Register on February 17,
2016, 8:45 a.m., and published in the issue of the Federal
Register for February 18, 2016, 81 F.R. 8149)

T.D. 9751
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1

PATH Act Changes to
Section 1445
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Final and temporary regulations.
SUMMARY: This document contains final and temporary regulations relating to
the taxation of, and withholding on, foreign persons upon certain dispositions of,
and distributions with respect to, United
States real property interests (USRPIs).
The regulations reflect changes made by
the Protecting Americans from Tax Hikes
Act of 2015 (the PATH Act). In addition,
the regulations update certain mailing addresses listed in regulations under sections
897 and 1445. These regulations affect
certain holders of USRPIs and withholding agents that are required to withhold
tax on certain dispositions of, and distributions with respect to, USRPIs. This
document also requests comments on certain other aspects of the PATH Act that
apply to dispositions of, and distributions
with respect to, USRPIs.

§ 1.6049 –10T [Removed]

DATES: Effective date: These regulations
are effective on February 19, 2016.
Applicability date: For dates of applicability, see §§ 1.1445–1(h), 1.1445–2(e),
and 1.1445–5(h).

Par. 7. Section 1.6049 –10T is removed.

ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG–101329 –16), room

Bulletin No. 2016 –10

379

5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be handdelivered Monday through Friday between
the hours of 8 a.m. and 4 p.m. to CC:PA:
LPD:PR (REG–101329 –16), Courier’s
Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC 20224,
or sent electronically via the Federal eRulemaking Portal at http://www.regulations.
gov (IRS REG–101329 –16).
FOR FURTHER INFORMATION
CONTACT: Milton M. Cahn or David A.
Levine, (202) 317-6937; concerning submissions of comments, Regina Johnson,
(202) 317-6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information contained in these final regulations were previously reviewed and approved by the Office of Management and Budget in
accordance with the Paperwork Reduction
Act of 1995 (44 U.S.C. 3507) under control numbers 1545-0123, 1545-0902, and
1545-1797 in conjunction with Treasury
decisions 7999 (49 FR 50689, Dec. 31,
1984), 8113 (51 FR 46620, Dec. 24,
1986), and 9082 (68 FR 46081, Aug. 5,
2003), respectively. There are no proposals for substantive changes to these collections of information.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number
assigned by the Office of Management
and Budget.
Books or records relating to a collection of information must be retained as
long as their contents might become material in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
Background
Section 897(a)(1) provides, in general,
that gain or loss of a nonresident alien
individual or foreign corporation from the
disposition of a United States real property interest (USRPI) shall be taken into
account under section 871(b)(1) or
882(a)(1), as applicable, as if the nonres-

March 7, 2016

ident alien individual or foreign corporation were engaged in a trade or business
within the United States during the taxable year and such gain or loss were effectively connected with that trade or
business.
Section 897(c)(1)(A) defines a USRPI
to include any interest (other than solely
as a creditor) in any domestic corporation unless the taxpayer establishes that
such corporation was at no time a United
States real property holding corporation
(USRPHC) during the applicable testing
period (generally, the five-year period
ending on the date of the disposition of the
USRPHC). Under section 897(c)(2), a
USRPHC means any corporation if the
fair market value of its USRPIs equals or
exceeds 50 percent of the total fair market
value of its USRPIs, its interests in real
property located outside the United States,
and any other assets that are used or held
for use in a trade or business. However,
section 897(c)(1)(B) generally provides
that an interest in a corporation is not a
USRPI if the corporation does not hold
USRPIs as of the date its stock is sold and
the corporation disposed of all of the
USRPIs that it held during the applicable
testing period in transactions in which the
full amount of gain, if any, was recognized (the cleansing exception).
Section 1445(a) generally imposes a
withholding tax obligation on the transferee when a foreign person disposes of a
USRPI. Section 1445(f)(3) provides that a
foreign person is any person other than a
United States person. Section 1445(e)(3)
generally imposes a withholding obligation on a domestic corporation that is a
USRPHC on distributions to foreign persons to which section 302 or sections 331
through 346 apply. Section 1445(e)(3)
also provides that similar rules are applicable to distributions to foreign persons
under section 301 that are not made out of
the earnings and profits of the domestic
corporation. Section 1445(e)(4) generally
requires a domestic or foreign partnership,
the trustee of a domestic or foreign trust,
or the executor of a domestic or foreign
estate to withhold on the distribution of
any USRPI to a partner or beneficiary who
is a foreign person. Under section
1445(e)(5), the transferee of a partnership
interest or of a beneficial interest in a trust or
estate is required to deduct and withhold tax

March 7, 2016

to the extent provided in regulations. Any
amounts withheld under section 1445 are
credited against the foreign transferor’s U.S.
tax liability. § 1.1445–1(f)(1).
Before the enactment of the Protecting
Americans from Tax Hikes Act of 2015,
Public Law 114 –113 (the PATH Act), the
withholding rate under sections 1445(a),
1445(e)(3), 1445(e)(4), and 1445(e)(5)
was 10 percent of either the amount realized or the fair market value of the interest, as applicable. Section 324(a) of the
PATH Act increased the withholding rate
under these sections from 10 percent to 15
percent. This new rate applies to dispositions after February 16, 2016. Section
324(b) of the PATH Act, however, retained the 10-percent withholding rate in
the case of a disposition of property that is
acquired by the transferee for his or her
use as a residence with respect to which
the amount realized is greater than
$300,000 but does not exceed $1 million.
Section 325 of the PATH Act provides
that the cleansing exception will not apply
to dispositions on or after December 18,
2015, if the corporation or its predecessor
was a real estate investment trust or a
regulated investment company at any time
during the shorter of the period that the
shareholder held the interest or the fiveyear period ending on the date of the
disposition of the shareholder’s interest in
the corporation.
Section 323(a) of the PATH Act added
section 897(l), which provides that section
897 does not apply (i) to USRPIs held
directly (or indirectly through one or more
partnerships) by, or (ii) to distributions
received from a real estate investment
trust by, a qualified foreign pension fund
or an entity wholly owned by a qualified
foreign pension fund. Section 897(l)(2)
defines a qualified foreign pension fund
for purposes of section 897(l), and section
897(l)(3) provides that the Secretary shall
prescribe such regulations as may be necessary or appropriate to carry out the purposes of section 897(l). In addition, section 323(b) of the PATH Act amended the
definition of foreign person in section
1445(f)(3) to provide that entities described in section 897(l) are not treated as
foreign persons for purposes of section
1445, except as otherwise provided by the
Secretary. The amendments in section 323
of the PATH Act are applicable to dispo-

380

sitions and distributions after December
18, 2015.
Explanation of Provisions
These regulations update § 1.897–2
and §§ 1.1445–1 through 1.1445–5, and
append an informational footnote to
§ 1.1445–11T(d)(2)(iii), to reflect changes
made by the PATH Act.
Additionally, for certain filings that are
described in regulations under sections
897 and 1445, these regulations provide
that the mailing address is the address
specified in the Instructions for Form
8288 under the heading “Where To File.”
Applicability Dates
Consistent with the PATH Act, the revisions to § 1.1445–2 to incorporate the
exemption under section 1445(f)(3) for
entities described in section 897(l) apply
to dispositions and distributions after December 18, 2015, and the revisions to
§ 1.897–2 regarding the cleansing exception apply to dispositions on or after December 18, 2015. The new withholding
rates described in these regulations apply
to dispositions of, and distributions with
respect to, USRPIs that occur after February 16, 2016.
Beginning after February 19, 2016,
taxpayers are required to use the revised
mailing address provided in these regulations. However, the IRS will not assert
penalties against taxpayers that use the
mailing address previously specified in
the regulations on or before June 20,
2016. Any prior timely filings made pursuant to the regulations under sections 897
and 1445 that were mailed to the address
specified in the Instructions for Form
8288 under the heading “Where To File,”
instead of the address previously specified
in the regulations, have been accepted by
the IRS.
Request for Comments
The Treasury Department and the IRS
request comments regarding what regulations, if any, should be issued pursuant to
section 897(l)(3). All comments that are
submitted as prescribed in this preamble
under the “Addresses” heading will be
available at www.regulations.gov or upon
request.

Bulletin No. 2016 –10

Special Analyses
Certain IRS regulations, including this
one, are exempt from the requirements of
Executive Order 12866, as supplemented
and reaffirmed by Executive Order 13563.
Therefore, a regulatory impact assessment
is not required. Because no notice of proposed rulemaking is required, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6)
is not required.
The Treasury Department and the IRS
have determined that section 553(b) of the
Administrative Procedure Act (APA) (5
U.S.C. chapter 5) does not apply to these
regulations, including because good cause
exists under section 553(b)(B) of the
APA. Section 553(b)(B) of the APA provides that an agency is not required to
publish a notice of proposed rulemaking
in the Federal Register when the agency,
for good cause, finds that notice and public comment thereon are impracticable,
unnecessary, or contrary to the public interest. These regulations are necessary to
ensure that existing regulations for transParagraph
(h)(2)(v), third sentence

(h)(4)(ii), first sentence

§ 1.897–2 United States real property
holding corporations.

Bulletin No. 2016 –10

Drafting Information
The principal authors of these regulations are Milton M. Cahn and David A.
Levine of the Office of Associate Chief
Counsel (International). However, other
personnel from the IRS and the Treasury
Department participated in their development.
*****

Remove
the Director, Philadelphia Service Center,
P.O. Box 21086, Drop Point 8731,
FIRPTA Unit, Philadelphia,
PA 19114-0586
the Director, Philadelphia Service Center,
P.O. Box 21086, Drop Point 8731,
FIRPTA Unit, Philadelphia,
PA 19114-0586

The addition reads as follows:

*****
(f) * * *
(2) * * *
(i) * * *

ferees and other parties properly reflect
the changes implemented by the PATH
Act. Because these regulations merely
conform the regulations to certain changes
made by the PATH Act, and update certain mailing addresses, prior notice and
public comment is unnecessary. Accordingly, good cause exists for dispensing
with notice and public comment pursuant
to section 553(b) of the APA. For the
same reasons that section 553(b) of the
APA does not apply, including because
good cause exists under section 553(d)(3)
of the APA, the requirements in section
553(d) of the APA for a delayed effective
date are inapplicable.

(ii) * * *
(iii) If the disposition occurs on or after
December 18, 2015, neither the corporation nor any predecessor of the corporation was a regulated investment company
or a real estate investment trust at any
time during the shorter of the periods described in section 897(c)(1)(A)(ii).
*****

381

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 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.897–2 is amended as
follows:
1. By removing “, and” at the end of
paragraph (f)(2)(i) and adding a semicolon in its place.
2. By removing the period at the end of
paragraph (f)(2)(ii) and adding “; and” in
its place.
3. By adding paragraph (f)(2)(iii) before the existing undesignated paragraph.
4. In each of the paragraphs listed in
the first column by removing the language
in the “Remove” column and adding in its
place the language in the “Add” column.

Add
the address specified in the Instructions for Form 8288 under the
heading “Where To File”
the address specified in the Instructions for Form 8288 under the
heading “Where To File”

§ 1.897–3 [Amended]
Par. 3. Section 1.897–3 is amended in
each of the paragraphs listed in the first
column by removing the language in the
“Remove” column and adding in its place
the language in the “Add” column.

March 7, 2016

Paragraph
(c) introductory text, first sentence

(d)(1), fourth sentence

(f)(1), second sentence

(f)(1), fifth sentence

Remove
with the Director, Philadelphia Service
Center, P.O. Box 21086, Drop Point
8731, FIRPTA Unit, Philadelphia,
PA 19114-0586
the Philadelphia Service Center

addressed to the Director, Philadelphia
Service Center, P.O. Box 21086, Drop
Point 8731, FIRPTA Unit, Philadelphia, PA 19114-0586
the Director, Philadelphia Service
Center

Par. 4. Section 1.1445–1 is amended as
follows:
1. By revising the first sentence and
removing the last sentence of paragraph
(b)(1).
2. By redesignating paragraphs (b)(2)
through (4) as paragraphs (b)(3) through
(5) respectively.

Add
at the address specified in the Instructions
for Form 8288 under the heading “Where
To File”
the address specified in the Instructions for
Form 8288 under the heading “Where To
File”
delivered to the address specified in the
Instructions for Form 8288 under the heading “Where To File”
the address specified in the Instructions for
Form 8288 under the heading “Where To File”

3. By adding a new paragraph (b)(2).
4. By revising paragraph (g)(10).
5. By revising the heading and adding
two sentences after the first sentence in
paragraph (h).
6. In each of the paragraphs listed in
the first column by removing the language

in the “Remove” column and adding in its
place the language in the “Add” column.

Paragraph
(a), second sentence

Remove
10 percent

newly designated (b)(4)(iii), first
sentence
newly designated (b)(4)(iii), second
sentence
(c)(2)(i)(A), first sentence

10 percent

Add
15 percent (10 percent in the case of dispositions
described in paragraph (b)(2) of this section)
15 percent

§ 1.1445–1(b)(3)(iii)

paragraph (b)(4)(iii)

10 percent

(c)(2)(i)(B), third sentence

10 percent

15 percent (10 percent in the case of dispositions
described in paragraph (b)(2) of this section )
15 percent (10 percent in the case of dispositions
described in paragraph (b)(2) of this section)

The additions and revisions read as follows:
§ 1.1445–1 Withholding on dispositions
of U.S. real property interests by foreign
persons: In general.
*****
(b) Duty to withhold—(1) In general.
Except as provided in paragraph (b)(2)
and §§ 1.1445–2 and 1.1445–3, transferees of U.S. real property interests are required to deduct and withhold a tax equal
to 15 percent of the amount realized by
the transferor if the transferor is a foreign
person.* * *

March 7, 2016

(2) Reduced rate for certain residences. Transferees of U.S. real property
interests are required to deduct and withhold a tax equal to 10 percent of the
amount realized by the transferor if the
transferor is a foreign person and the following requirements are satisfied:
(i) the property is acquired by the transferee for use by the transferee as a residence;
(ii) the amount realized for the property does not exceed $1,000,000; and
(iii) section 1445(b)(5) does not apply
to the disposition. See § 1.1445–2(d)(1).
*****
(g) * * *

382

(10) Address for correspondence. Any
written communication to the Internal
Revenue Service described in this section
is to be mailed to the address specified in
the Instructions for Form 8288 under the
heading “Where To File.”
(h) Applicability dates. * * * The withholding rates set forth in paragraphs (a),
(b)(1), (b)(2), (b)(4)(iii), (c)(2)(i)(A), and
(c)(2)(i)(B) of this section apply to dispositions after February 16, 2016. For dispositions on or before February 16, 2016,
see paragraphs (a), (b)(1), (b)(3)(iii),
(c)(2)(i)(A), and (c)(2)(i)(B) of this section as contained in 26 CFR part 1 revised
as of April 1, 2015.

Bulletin No. 2016 –10

Par. 5. Section 1.1445–2 is amended as
follows:
1. By revising the first sentence in the
undesignated paragraph following paragraph (b)(2)(i)(C).
Paragraph
(b)(4)(iv), second sentence
(b)(4)(iv), third sentence
(b)(4)(iv), fourth sentence
(c)(3)(iii), second sentence
(c)(3)(iii), third sentence
(c)(3)(iii), fourth sentence
(d)(2)(i)(B), first sentence

(d)(3)(i)(A) introductory
text, first sentence
(d)(3)(i)(B) introductory
text, first sentence

Remove
10 percent
10 percent
10 percent
10 percent
10 percent
10 percent
provides a copy of the transferor’s
notice to the Director, Philadelphia
Service Center
10 percent
10 percent

The additions and revision read as follows:
§ 1.1445–2 Situations in which
withholding is not required under
section 1445(a).
*****
(b) * * *
(2) * * *
(i) * * *
(C) * * *
In general, a foreign person is a nonresident alien individual, foreign corporation, foreign partnership, foreign trust, or
foreign estate, but not a qualified foreign
Paragraph
(b)(1), first sentence
(f)(1), first sentence
(f)(2)(iii), heading
(f)(2)(iii), first sentence
(g) introductory text, third sentence

4. In each of the paragraphs listed in
the first colum by removing the language in the “Remove” column and adding in its place the language in the
“Add” column.

Add
15 percent
15 percent
15 percent
15 percent
15 percent
15 percent
mails a copy of the transferor’s notice to the
Internal Revenue Service
15 percent (10 percent in the case of dispositions described in § 1.1445–1(b)(2))
15 percent (10 percent in the case of dispositions described in § 1.1445–1(b)(2))

pension fund (as defined in section 897(l))
or an entity all of the interests of which
are held by a qualified foreign pension
fund. * * *
(4) * * *
(iv) * * * For dispositions described in
§ 1.1445–1(b)(2), this paragraph shall be
applied by replacing “15 percent” with
“10 percent” each time it appears.
*****
(e) Applicability dates. * * * The exclusion of entities described in section
897(l) from the definition of foreign person in paragraph (b)(2)(i) of this section
applies to dispositions and distributions
after December 18, 2015, and the with-

holding rates set forth in paragraphs
(b)(4)(iv), (c)(3)(iii), and (d)(3)(i) of this
section apply to dispositions after February 16, 2016. For dispositions on or before
February 16, 2016, see paragraphs
(b)(4)(iv), (c)(3)(iii), and (d)(3)(i) of this
section as contained in 26 CFR part 1
revised as of April 1, 2015.
§ 1.1445–3 [Amended]
Par. 6. Section 1.1445–3 is amended in
each of the paragraphs listed in the first
column by removing the language in the
“Remove” column and adding in its place
the language in the “Add” column.

Remove
to the Director, Philadelphia Service Center, at
to the Director, Philadelphia Service Center, at
by the Director, Philadelphia Service Center,
by the Director, Philadelphia Service Center or his delegate
addressed to the Director, Philadelphia Service Center, at

§ 1.1445– 4 [Amended]
Par. 7. Section 1.1445– 4 is amended in
each of the paragraphs listed in the first

Bulletin No. 2016 –10

2. In paragraph (b)(4)(iv), by adding a
sentence after the last sentence.
3. In paragraph (e), by revising the
heading and adding two sentences after
the first sentence.

Add
to
to
on behalf of the Service
on behalf of the Service
delivered to

column by removing the language in the
“Remove” column and adding in its place
the language in the “Add” column.

383

March 7, 2016

Paragraph
(c)(1), tenth sentence

Remove
from a foreign person must withhold
a tax equal to 10 percent

(c)(1), thirteenth sentence

10 percent tax

(c)(2), second sentence

to the Director, Philadelphia Service
Center, at

Par. 8. Section 1.1445–5 is amended as
follows:

1. In each of the paragraphs listed in
the first column, by removing the language in the “Remove” column and add-

Paragraph
(b)(2)(ii) introductory text, first sentence
(c)(3)(iv) introductory text, second sentence
(c)(3)(v), first sentence
(c)(3)(v), fifth sentence
(e)(1) introductory text, first sentence
2. In paragraph (h), by revising the
heading and adding two sentences after
the first sentence.
The revision and additions read as follows:
§ 1.1445–5 Special rules concerning
distributions and other transactions by
corporations, partnerships, trusts, and
estates.
*****

Add
from a foreign person after February 16, 2016, must withhold a tax
equal to 15 percent (10 percent in
the case of dispositions described
in § 1.1445–1(b)(2))
15 percent tax (10 percent tax in
the case of dispositions described
in § 1.1445–1(b)(2))
to

ing in its place the language in the “Add”
column.

Remove
to the Director, Philadelphia Service Center, at
10 percent
with the Director, Philadelphia Service Center, at
with the Director, Philadelphia Service Center, at
10 percent

(h) Applicability dates. * * * The withholding rates set forth in paragraphs
(c)(3)(iv) and (e)(1) of this section apply
to distributions after February 16, 2016.
For distributions on or before February
16, 2016, see paragraphs (c)(3)(iv) and
(e)(1) of this section as contained in 26
CFR part 1 revised as of April 1, 2015.

Paragraph
(f)(1), first sentence
(f)(2)(iii), heading
(f)(2)(iii), first sentence

Par. 10. Section 1.1445–11T is amended
in paragraph (d)(2)(iii) by adding footnote
“1” after the last sentence to read as follows:
§ 1.1445–11T Special rules requiring
withholding under § 1.1445–5
(temporary).

(2) * * *
(iii) * * *

to
15 percent
at
at
15 percent

§ 1.1445– 6 [Amended]
Par. 9. Section 1.1445– 6 is amended in
each of the paragraphs listed in the first
column by removing the language in the
“Remove” column and adding in its place
the language in the “Add” column.

Remove
to the Director, Philadelphia Service Center, at
by the Director, Philadelphia Service Center
by the Director, Philadelphia Service Center, or his delegate
(g) introductory text, second sentence addressed to the Director, Philadelphia Service Center, at

§ 1.1445–11T [Amended]

Add

Add
to
on behalf of the Service
on behalf of the Service
delivered to
Mark J. Mazur,
Assistant Secretary of the
Treasury (Tax Policy).

John Dalrymple,
Deputy Commissioner for
Services and Enforcement.

(Filed by the Office of the Federal Register on February 17,
2016, 4:15 p.m., and published in the issue of the Federal
Register for February 19, 2016, 81 F.R. 03421)

Approved: February 12, 2016.

*****
(d) * * *
1

Section 324(a) of the Protecting Americans from Tax Hikes Act of 2015 (Public Law 114 –113) increased the withholding rate under section 1445(e)(5) to 15 percent, applicable to
dispositions after February 16, 2016.

March 7, 2016

384

Bulletin No. 2016 –10