Section 3. Documentation Transition

Rules

The new withholding regulations contain transition rules affecting the documentation that must be obtained under the new withholding regulations. See, for example, §§1.1441–1(f)(2)(i), 1.1441–4(g), 1.1441–5(g), and 1.1441–6(g). Those documentation transition rules generally permit the use of Forms W-8, 1001, 1078, 4224, and 8709, or a statement under current regulation §1.1441–5 (“old documentation”) until December 31, 2000. The new withholding regulations will not extend the use of old documentation beyond December 31, 2000. An extension is not necessary because Forms W-8BEN, W-8ECI, and W-8EXP (“new withholding certificates”) which replace the old documentation, and which comply with the new withholding regulations, have been available since the end of 1998. Therefore, withholding agents will have had over two years to replace old documentation with new withholding certificates. The regulations incorporating the effective date change will continue to treat new withholding certificates as satisfying the documentation requirements of the regulations in effect prior to January 1, 2001.

The final regulations concerning certain payments made pursuant to a securities lending or sale-repurchase transaction provide that substitute interest payments made with respect to securities that give rise to U.S. source interest income may be characterized as portfolio interest if the transferor of the security complies with the documentation requirements of §1.871–14(c) of the final withholding regulations. Because §1.871–14(c) of the final withholding regulations was not to be effective before January 1, 1999, Notice 97–66 contained a transition rule providing that the statement requirement of section 871(h)(5) would 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 before, or within a reasonable period after, the payment. In Notice 98–16, the IRS extended the transition rule of Notice 97–66 to apply to substitute interest payments made after November 13, 1997 (or after December 31, 1998 if elected) and before January 1, 2000. Because the IRS intends to make §1.871–14(c) of the new withholding regulations effective for payments made after December 31, 2000, as announced herein, the transition rule in Notice 97–66 is extended to apply to sub

stitute interest payments made after November 13, 1997 (or after December 31, 1998, if elected) and before January 1, 2001. Without this extension, withholding agents would be limited to using Form W-8 or Form W-8BEN to apply the portfolio interest exemption. The remainder of Notice 97–66 remains unchanged.

Finally, in Announcement 99–24, 1999–14 I.R.B. 12, the IRS asked for comments on proposed changes to Form 1042-S that would be effective for forms to be filed in 2001. Because of the delay in the effective date of T.D. 8734, the suggested changes set forth in Announcement 99–24 are now proposed to apply to Forms 1042-S filed in 2002. The 2000 Form 1042-S will remain the same size and format as the 1999 forms. The 1999 form may, however, be revised to reflect changes in the law.