SEC. 4. APPLICATIONS FOR — Internal Revenue Bulletin 2000-35

WITHHOLDING CERTIFICATES

.01 General rules . An application for a withholding certificate must be submitted to the Internal Revenue Service Center, P.O. Box 21086, Drop Point 8731 FIRPTA Unit, Philadelphia, PA 191140586. Either a transferee or a transferor may apply for a withholding certificate, but only a transferor may apply for a blanket withholding certificate. The Service ordinarily will act upon an application not later than the 90th day after all information necessary for the Service to make a determination is received. However, in the case of an application for a certificate described in section 4.03(6) below, or in unusually complicated cases, the Service may be unable to provide a withholding certificate by the 90th day. In such a case, the Service will notify the applicant by the 45th day after all information necessary for the Service to make a determination is received that additional processing time will be necessary. The Service’s notice may request additional information or

explanation concerning particular aspects of the application and will provide a target date for final action (contingent upon the applicant’s timely submission of any requested information).

If an application for a withholding certificate is submitted before or on the date of a transfer and on the date of the transfer the application remains pending with the Service, the amount required to be withheld by the transferee is not required to be reported and paid over immediately. Similarly, if an application for a blanket withholding certificate is submitted before or on the date of the first transfer covered by the application, and on the date of the first transfer the application remains pending with the Service, the amount required to be withheld by the transferee is not required to be reported and paid over immediately. Instead, that amount (or such other amount as is appropriate) must be reported and paid over by the 20th day following the day upon which a copy of the withholding certificate or notice of denial is mailed by the Service. If the application is not submitted before or on the date of the transfer, or in the case of a blanket withholding certificate application, before or on the date of the first transfer, the transferee must report and pay over any tax withheld by the 20th day after the date of the transfer. Treas. Reg. § 1.1445-1(c)(1).

.02 Required signatures. An application for a withholding certificate must be signed by a responsible officer in the case of a corporation, by a general partner in the case of a partnership, by a trustee, executor, or equivalent fiduciary in the case of a trust or estate, and, in the case of an individual, by that individual. In addition, an application may be signed by an agent authorized to do so by a power of attorney. Form 2848 may be used for this purpose. The person signing the application must verify under penalties of perjury that all representations made in connection with the application are true, correct, and complete to the best of that person’s knowledge and belief. To the extent that an application is premised in whole or in part on information provided by another party to the transaction, this information is to be supported by a written verification attached to that application signed under penalties of perjury by the party to whom it pertains. The application must follow the format set forth in section 4.04 below.

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.03 Categorizing of applications . To facilitate the processing of applications for withholding certificates, this revenue procedure divides all applications into six basic categories as follows:

Applications for withholding certificates based on a claim that the transferor is entitled to nonrecognition treatment or is exempt from tax;
Applications for withholding certificates based solely on a calculation of the transferor’s maximum tax liability;
Applications for withholding certificates under the special installment sales rules of section 7 of this revenue procedure;
Applications for withholding certificates based on an agreement for the payment of tax with conforming security;
Applications for blanket withholding certificates under section 9 of this revenue procedure; and
Applications for withholding certificates on any other basis.

.04 Format for application . All applications for withholding certificates must provide the following information in paragraphs labeled to correspond with the numbers and letters set forth below. Place “N/A” in the relevant space if the information requested is not applicable to the application being submitted.

(a) State which category of section 4.03, above, describes the application; (b) In the case of category 4 appli cations (agreement for the payment of tax with conforming security): (1) State whether the proposed

agreement secures (A) the transferor’s maximum tax liability, or (B) the amount that would otherwise be required to be withheld; and (2) State whether the proposed

agreement and security instrument conform to the standard formats set forth in this revenue procedure. 2. (a) Provide the name, taxpayer identification number (to the extent required in regulations), and home address (for an individual) or office address (for an entity) of the person applying for the withholding certificate. A mailing address should

also be included if different. (b) State whether the applicant is

the transferee or transferor. (c) Provide the name, address, and

taxpayer identification number (to the extent required in regulations) of all other transferees and transferors (specifying whether such party is a transferee or transferor) of the U.S. real property interest with respect to which the withholding certificate is sought. The applicant must determine if a taxpayer identification number exists for each party concerned and if none exists for a particular party the application must so state. Any application that is combined with the transferor’s request for an early refund must include the transferor’s taxpayer identification number. 3. Provide the following information concerning the U.S. real property interest with respect to which the withholding certificate is sought:

(a) Type of interest (that is, inter est in real property, in associated personal property, or in a domestic U.S. real property holding corporation); (b) The contract price; (c) Date of transfer; (d) In the case of an interest in real

property, its location and a general description of the property (for example, “10story, 100 unit luxury apartment building”); and (e) In the case of an interest in a

U.S. real property holding corporation, the class or type and amount of the interest. (f) Whether in the three preceding

taxable years: (1) U.S. income tax returns were filed relating to the U.S. real property interest, and if so, when and where those returns were filed, and if not, why returns were not filed; and (2) whether U.S. income taxes were paid relating to the U.S. real property interest, and if so, the amount of the tax paid. 4. Provide full information concerning the basis for the issuance of the withholding certificate, in accordance with the

rules of sections 4.05 through 4.11 below. Although the information to be included in this section of the application will necessarily vary from case to case, the rules set forth below provide general guidelines for the inclusion of appropriate information with respect to each category of application.

The use of Form 8288-B to apply for a withholding certificate under categories 1 through 3 will expedite the application process. An application that is not substantially complete when submitted will be rejected. For example, an application without a specific or estimated date of transfer will not be considered to be substantially complete.

.05 Information concerning category 1 applications (nonrecognition or exempt transfer) . If a withholding certificate is sought on the basis of a claim that the transaction is entitled to nonrecognition treatment or is exempt from U.S. taxation, provide the following:

A brief description of the transfer;
A brief summary of the law and facts supporting the claim of nonrecognition or exemption;
Evidence that the transferor has no unsatisfied withholding liability, as described in section 4.06(3); and
The contract price (if any), or if no contract price is available, the most recent assessed value, for state or local property tax purposes, of the U.S. real property interest to be transferred, or, if such assessed value is not available, then the good faith estimate of its fair market value (no supporting evidence concerning the value of the property need be supplied).

.06 Information concerning category 2 applications (determination of maximum tax liability) .

In general . If a withholding certificate is sought on the basis of a determination of the transferor’s maximum tax liability, information must be provided to establish the two elements of that liability: (a) the maximum tax that may be imposed on the disposition, and (b) the transferor’s unsatisfied withholding liability. Paragraphs 4.06(2) and .06(3), below, provide guidelines for the furnishing of such information. For further information concerning the determination of the transferor’s maximum tax liability, see section 1.1445-3(c) of the regulations.

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Maximum tax on disposition . (a) The applicant must provide a calculation of the maximum tax that may be imposed on the disposition, including the following information:

(1) The amount to be realized by

the transferor plus evidence confirming this amount, such as a copy of the signed contract relating to the transfer; (2) Adjusted basis of the prop erty plus evidence confirming the basis claimed, such as schedules of depreciation for tax purposes (if no depreciation schedules are provided, the application must state the nature of the use of the property and why depreciation was not allowed); (3) Amounts to be recaptured

with respect to depreciation, investment tax credit, or other items subject to recapture; (4) Maximum capital gain and/or ordinary income tax rates applicable to the transfer; (5) Tentative tax owed; (6) Amount of any increase or

reduction of tax to which the transferor is subject, including any reduction to which the transferor is entitled under a provision of a U.S. income tax treaty as well as evidence supporting the adjustment claimed. See section 1.1445-3(c)(2) of the regulations. (b) For purposes of calculating the maximum tax that may be imposed upon a disposition, unused credit carryovers shall not be taken into account, and net operating loss carry-overs (NOLs) (see section 172 of the Code) may be taken into account only if:

(1) The transferor claiming the

NOL has been engaged in a trade or business in the U.S. during the three preceding tax years and has timely filed an income tax return for each of those years (copies of which should be attached);

(2) The claimed NOL has been

reflected on previously-filed returns (no anticipated loss with respect to current year operations may be considered); (3) The claimed NOL is not cur rently the subject of an examination by or a dispute with the Service; (4) The transferor agrees that, if

the amount of gain that the transferor claimed would be offset by the NOL exceeds the amount of the gain actually recognized and offset by the claimed NOL when the transferor files its tax return for the current tax year, the transferor will pay interest upon the excess of the amount that should have been subject to withholding over the amount, if any, actually withheld, which interest will be computed:

(A) At the rates and in the

manner prescribed by sections 6621 and 6622 of the Code; and (B) With respect to the pe riod between the date on which withholding would otherwise have been required and the date on which payment is made (for purposes of determining whether gain recognized on the disposition was in fact offset by the claimed NOL, the NOL is deemed first to offset income from sources other than the disposition of U.S. real property interests, and then to offset gain from such dispositions with respect to which a withholding certificate was issued in the order to which such dispositions occurred); (5) The claimed NOL has not

previously been used to

reduce withholding upon other dispositions of U.S. real property interests or to reduce the amount of any other obligation or liability under U.S. internal revenue laws; and (6) As part of the application,

the transferor represents that:

(A) At least 80 percent of

its gross income subject to U.S. taxation in the taxable year of disposition will be derived from U.S. real property interests; and (B) In calculating the

maximum tax that may be imposed on the disposition, the application calculates the NOL in the manner prescribed by the provisions of this section 4.06(2)(b), and the NOL is taken into account only to the extent permitted by such provisions. 3. Transferor’s unsatisfied withhold- ing liability . The applicant must provide a calculation of the transferor’s unsatisfied withholding liability or evidence that it does not exist. That liability is the amount of any tax that the transferor was required to but did not withhold and pay over under section 1445 of the Code upon the acquisition of the subject U.S. real property interest or a predecessor interest. The transferor’s unsatisfied withholding liability is included in the calculation of maximum tax liability so that such prior withholding liability may be satisfied by the transferee’s withholding upon the current transfer. For purposes of this paragraph 3, a predecessor interest is one that was exchanged for the subject U.S. real property interest in a transaction in which the transferor was not required to recognize the full amount of the gain or loss realized upon the transfer. For further information, see section 1.1445-3(c)(3) of the regulations. Evidence that the transferor has no unsatisfied withholding liability includes any one of the following items:

(a) Evidence that the transferor ac quired the subject or predecessor

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U.S. real property interest before January 1, 1985; (b) A copy of the Form 8288 that

was filed by the transferor, and proof of payment of the amount shown due thereon, with respect to the transferor’s acquisition of the subject or predecessor U.S. real property interest; (c) A copy of a withholding certifi cate issued with respect to the transferor’s acquisition of the subject or predecessor U.S. real property interest, plus a copy of Form 8288 and proof of payment with respect to any withholding required under that certificate; (d) A copy of the nonforeign certifi cate (see Treas. Reg. §1.14452(b)(2))furnished by the person from whom the subject U.S. real property interest was acquired, executed at the time of that acquisition; (e) Evidence that the transferor pur chased the subject or predecessor U.S. real property interest for $300,000 or less and a statement, signed by the transferor under penalties of perjury, that the transferor purchased the property for use as a residence within the meaning of section 1.1445-2(d)(1); (f) Evidence that the person from

whom the transferor acquired the subject or predecessor U.S. real property interest fully paid any tax imposed on that transaction pursuant to section 897; (g) A copy of a notice of nonrecogni tion treatment provided to the transferor pursuant to section 1.1445-2(d)(2) by the person from whom the transferor acquired the subject or predecessor U.S. real property interest; and (h) A statement, signed by the trans feror under penalties of perjury, setting forth the facts and circumstances that support the transferor’s conclusion that no withholding was required under section 1445(a) with respect to the transferor’s acquisition of the subject or predecessor U.S. real property interest. .07 Information concerning category 3 applications (installment sales) . See sec

tion 7 of this revenue procedure.

.08 Information concerning category 4 applications (agreement for the payment of tax with conforming security) . If a withholding certificate is sought on the basis of an agreement for the payment of tax, the application must include:

Information establishing: (a) The transferor’s maximum tax

liability, in accordance with section 4.06; or (b) The amount otherwise re quired to be withheld pursuant to section 1445(a) of the Code; 2. A signed copy of the agreement proposed by the applicant; and

A copy of the security instrument proposed by the applicant. For further information concerning agreements for the payment of tax and security instruments, see sections 5 and 6 of this revenue procedure and section 1.1445-3 of the regulations.

.09 Information concerning category 5 applications (blanket withholding certifi- cate) . See section 9 of this revenue procedure.

.10 Information concerning Category 6 applications (non-standard applications) .

Agreement for payment of tax with nonconforming security . If the applicant seeks to enter into an agreement for the payment of tax, but wishes to provide a nonconforming type of security, the application must include:

(a) The information required by

section 4.08 concerning category 4 applications; (b) A description of the noncon forming security proposed by the applicant; and (c) A memorandum of law and

facts establishing that the proposed security is valid and enforceable and that it adequately protects the government’s interest. 2. Other non-standard applications . An application for a withholding certificate not otherwise described in this revenue procedure must explain in detail the proposed basis for the issuance of the certificate and set forth the reasons justifying the issuance of a certificate on that basis.

.11 Information submitted by foreign governments . In addition to the information required in Sec. 4.04 and Sec. 4.05, a foreign government submitting an appli

cation on the basis that the subject U.S. real property is used by the foreign government for a diplomatic mission should submit the following information:

Information identifying the diplomatic property;
Information establishing that the property is used by the foreign government for a diplomatic mission; and
Information describing whether the property has been recognized by the State Department as being diplomatic property subject to the Foreign Missions Act, § 202, 22 U.S.C. § 4305 (1982).

.12 Availability of records . The applicant shall make available to the Commissioner, within the time prescribed by the Commissioner, all information that may be required by the Commissioner in order to verify that representations relied upon by the Commissioner in accepting the agreement are accurate, and that the obligations assumed by the applicant will be performed pursuant to the agreement. Failure to provide requested information promptly will usually result in rejection of the application. Instead of such rejection, the Commissioner, in his discretion, may also consider extension of an established target date for issuing a withholding certificate. The parties shall agree that the review of books and records pursuant to the agreement shall not constitute an examination for purposes of section 7605(b) of the Code.