Exception:

The certification country exceptions are Bangladesh, Bulgaria, Cyprus, Hungary, Iceland, India, Kazakhstan, Malta, New Zealand, Russia, South Africa, Sri Lanka, or Ukraine. This exception only applies if the certification country is one of the countries listed above and the country of residence is not the same country.

If any one of the shareholders on the Parent S corp. filed an individual tax return as a non-resident (Form 1040-NR):

Reject the Q-Sub certification application.

Attach to the copy of the application a current transcript (TXMODA, IMFOLT or BMFOLT) for the tax year and TIN of all modules involved. Annotate that the attached 1120S filer appears to be in violation of its 2553 election.

Forward the case to Examination for Classification.

Working status codes for Q-Sub Applicants:

If

Then

1. Status Code 103

Check for input errors, verify that application information was entered according to (6) above. Correct, if needed.

2. Compare the Form 8802 to the input screen and IDRS and corrections can be made, the parent S Corp. filed, and all shareholders valid

Make all corrections and issue certification.

3. Compare the Form 8802 to the input screen and IDRS and No errors can be found; no correction can be made

The Q-Sub cannot be certified.

4. Status Code 515

Verify that the application isn't for VAT.

5. VAT Application

Check VAT indicator and process VAT Certification.

6. Application is not for VAT

Reject the Q-Sub application using the instructions. See IRM 21.8.4.4.12.1.3, S Corporation Applicants.

7. Status Code 522

Verify that the shareholder TIN is correct and that a 1040NR was truly filed.

8. Shareholder(s) filed a Form 1040-NR

Reject the Q-Sub application using instructions. See IRM 21.8.4.4.12.1.3, S Corporation Applicants.

Any Q-Sub Applicant that has had its application declined, but believes it is entitled to U.S. Residency Certification, must submit a copy of its completed Form 8802, attach a detailed explanation and/or regulation or Code section, including documentary evidence, as to why it believes it is entitled to certification.

Place the case in status 702, and

Forward all applications and attachments to Planning and Analysis.

Any Q-Sub that has had its application declined or certification rejected, but believes it is entitled to treaty benefits under a specific treaty article, must follow Rev. Proc. 2015-40 to request Competent Authority help.