• With respect — Internal Revenue Bulletin 2012-47

compliant FFI: any account, instrument, or contract maintained or executed by the FFI prior to the date on which the FFI implements its required account opening procedures. A registered deemed-compliant FFI must implement any required account opening procedures by the later of January 1, 2014, or the date on which the FFI registers as a deemed-compliant FFI.

B. Transition Rules for Completing Due Diligence on Preexisting Obligations

1. Withholding and Documentation for Prima Facie FFIs

Withholding Agents other than Partic- ipating FFIs . With respect to preexisting obligations, the final regulations will provide that withholding agents, other than participating FFIs, will be required to document payees that are prima facie FFIs by June 30, 2014. Accordingly, the rule set forth in Prop. Reg. §1.1471–2(a)(4)(ii)

will be modified in the final regulations to provide that a withholding agent will not be required to withhold on payments made to a prima facie FFI with respect to a preexisting obligation prior to July 1, 2014, unless the withholding agent has documentation establishing the payee’s status as a nonparticipating FFI. Beginning on July 1, 2014, a withholding agent will be required to treat a payee that is a prima fa- cie FFI as a nonparticipating FFI until the date the withholding agent obtains documentation sufficient to establish a different chapter 4 status of the payee.

Participating FFIs . With respect to a preexisting obligation, the final regulations will provide that a participating FFI will be required to perform the requisite identification procedures and obtain the appropriate documentation to determine whether a prima facie FFI payee is itself a participating FFI, deemed-compliant FFI, or nonparticipating FFI within six months after the effective date of its FFI agreement (that is, by June 30, 2014, for any FFI that enters into an FFI agreement on or before December 31, 2013). The rule set forth in Prop. Reg. §1.1471–4(c)(3) will be modified accordingly. In addition, the final regulations will provide that the presumption rules set forth in Prop. Reg. §1.1471–3(f) will begin to apply to a prima facie FFI payee with respect to a preexisting obligation six months after the effective date of the payor FFI’s FFI agreement.

2. Withholding and Documentation for other Preexisting Entity Obligations

Withholding Agents other than Partic- ipating FFIs . With respect to preexisting obligations, the final regulations will provide that withholding agents, other than participating FFIs, will be required to document payees that are entities other than prima facie FFIs by December 31, 2015. Accordingly, the rules set forth in Prop. Reg. §§1.1471–2(a)(4)(ii) and 1.1472–1(b) will be modified to reflect this change. Beginning on January 1, 2016, a withholding agent will be required to treat any undocumented payee that is treated as a foreign entity but that is not a prima facie FFI as a nonparticipating FFI until the date the withholding agent obtains documentation sufficient to establish a different chapter 4 status of the payee.

2012–47 I.R.B. 562 November 19, 2012

gation” will include any instrument that gives rise to a withholdable payment solely because the instrument is treated as giving rise to a dividend equivalent pursuant to section 871(m) and the regulations thereunder, provided that the instrument is outstanding on the date that is six months after the date on which instruments of its type first become subject to such treatment. Finally, the term “grandfathered obligation” will include any obligation to make a payment with respect to, or to repay, collateral posted to secure obligations under a notional principal contract that is a grandfathered obligation.

DRAFTING INFORMATION

The principal author of this announcement is Tara Ferris of the Office of Associate Chief Counsel (International). For further information regarding this notice, contact John Sweeney at (202) 622–3840 (not a toll-free call).

account, other than a high-value account, as held by a recalcitrant account holder unless the participating FFI has performed the requisite identification procedures and obtained the appropriate documentation.

IV. DUE DATE FOR FIRST REPORT OF A PARTICIPATING FFI WITH RESPECT TO U.S. ACCOUNTS

The final regulations will modify the rule set forth in Prop. Reg. §1.1471–4(d)(7)(v)(B) to provide that a participating FFI will be required to file the information reports with respect to the 2013 and 2014 calendar years not later than March 31, 2015.

V. GROSS PROCEEDS WITHHOLDING

The final regulations will modify the rule set forth in Prop. Reg. §1.1473–1(a)(1)(ii) to provide that the term “withholdable payment” includes

gross proceeds from any sale or other disposition occurring after December 31, 2016, of any property of a type that can produce interest or dividends that are U.S. source FDAP income.

VI. CLARIFICATION OF THE SCOPE OF GRANDFATHERED OBLIGATIONS

The final regulations will modify the grandfathered obligation rules to cover the following additional categories of obligations. First, the rule set forth in Prop. Reg. §1.1471–2(b)(2) will be amended to provide that the term “grandfathered obligation” includes any obligation that produces or could produce a foreign passthru payment and that cannot produce a withholdable payment, provided that the obligation is outstanding as of the date that is six months after the date on which final regulations defining the term “foreign passthru payment” are filed with the Federal Register. Second, the term “grandfathered obli

November 19, 2012 563 2012–47 I.R.B.

Summary of Timing for Performing Due Diligence Procedures to Identify and Document Accounts

The following table summarizes the dates by which withholding agents and financial institutions must fully implement new account opening procedures to identify account holders and the dates by which withholding agents and financial institutions must complete the review and documentation of all preexisting accounts for purposes of applying the relevant Treasury regulations. The table is intended only as an illustrative tool and therefore should be interpreted consistently with the accompanying announcement. It is important to emphasize that although the final regulations will provide a reasonable period of time to allow withholding agents to review and document all preexisting accounts, the final regulations will make clear that once a particular account has been documented, for example as a U.S. Account or as a nonparticipating FFI, withholding or reporting, as appropriate, must begin with respect to that account even though the time period for completing the identification and documentation of preexisting accounts may not have expired.

	New Individual and Entity Accounts (Implementation of new account opening procedures)	Preexisting Accounts of Prima Facie FFIs (Date by which due diligence must be completed for all accounts)	Preexisting Accounts of Entities other than Prima Facie FFIs	Preexisting High Value Accounts of Individuals	Preexisting Accounts of Individuals other than High Value Accounts
Withholding Agents other than Participating FFIs and Deemed- Compliant FFIs	By January 1, 2014	By June 30, 2014	By December 31, 2015	N/A	N/A
Withholding Agents that are Participating FFIs	By later of January 1, 2014, or effective date of FFI agreement	By the later of June 30, 2014, or 6 months after the effective date of the FFI Agreement	By the later of December 31, 2015, or two years after the effective date of the FFI Agreement	By the later of December 31, 2014, or one year after the effective date of the FFI Agreement	By the later of December 31, 2015, or two years after the effective date of the FFI Agreement
Withholding Agents that are Registered Deemed- Compliant FFIs	By later of January 1, 2014, or date of registration	N/A	N/A	N/A	N/A

2012–47 I.R.B. 564 November 19, 2012