SECTION 2. SUBSTITUTE INTEREST

PAYMENTS

Substitute interest payments made by a foreign person that are U.S. source interest under the final regulations must satisfy the statement requirement of section 871(h)(5) to qualify as portfolio interest. The final regulations refer taxpayers to § 1.871–14(c) for this purpose, but those regulations are not generally applicable until January 1, 1999. Under this Notice, the statement requirement of section 871(h)(5) will be satisfied with respect to substitute interest payments made after November 13, 1997 and before January 1, 1999, if any written, electronic, or oral statement that reasonably establishes that the payee is a foreign person is given or made to the payor prior to, or within a reasonable period of time after, the payment. The statement requirement of the preceding sentence is deemed to be satisfied if the payor is subject to, and satisfies with respect to the payee, the regulatory rules in the jurisdiction in which the payor is operating regarding establishing the identity of a customer (i.e., “know your customer” rules). Also, if a taxpayer makes an election under § 1.14411(f)(2)(ii), such election will be effective, pursuant to this Notice, to allow a withholding agent to apply retroactively the documentation requirements of § 1.871–14(c) with respect to one or more substitute interest payments made after November 13, 1997. Treas. Reg. § 1.871–14(c)(3) allows a withholding agent to collect a certificate or documentary evidence at any time until the expiration of the beneficial owner’s period of limitation for claiming a refund of tax with respect to portfolio interest.