SECTION 3. APPLICATION FOR QI

STATUS

.01 Entities Eligible to Execute a QI Agreement . A QI agreement may be entered into by persons described in § 1.1441–1(e)(5)(ii) (for example, FFIs, foreign clearing organizations, and foreign branches of U.S. financial institutions or U.S. clearing organizations). With respect to an FFI, as defined in § 1.1471– 5(d), the FFI may apply to enter into a QI agreement if the FFI is able to and agrees to satisfy the requirements and obligations of (1) a participating FFI (including a reporting Model 2 FFI), (2) a registered deemed-compliant FFI (including a re

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porting Model 1 FFI and a nonreporting Model 2 FFI treated as registered deemedcompliant), or (3) a registered deemedcompliant Model 1 IGA FFI (as defined in section 2.17(C) of the proposed QI agreement). See § 1.1471–1(b)(91) and (111). An FFI that is a certified deemedcompliant FFI (including a nonreporting IGA FFI (as defined in § 1.1471–1(b)(83)) may enter into a QI agreement if the FFI meets and agrees to assume the obligations of, and to be treated as, a participating FFI (including a reporting Model 2 FFI), a registered deemed-compliant FFI (including a reporting Model 1 FFI or a nonreporting Model 2 FFI treated as registered deemed-compliant), or a registered deemed-compliant Model 1 IGA FFI with respect to all accounts that it maintains (even if the FFI does not intend to designate an account as one for which it will act as a QI). A central bank of issue may enter into a QI agreement provided that it meets and agrees to assume the obligations of, and to be treated as, a participating FFI (including a reporting Model 2 FFI) or a registered deemed-compliant FFI (including a reporting Model 1 FFI) with respect to any account that it maintains and that is held in connection with a commercial financial activity described in § 1.1471– 6(h) and for which it receives a withholdable payment (as defined in § 1.1471– 1(b)(145)). A foreign branch of a U.S. financial institution may also apply to enter into a QI agreement provided that either it is a reporting Model 1 FFI or it agrees to assume the requirements and obligations of a participating FFI (including a reporting Model 2 FFI). See § 1.1441–1(e)(5)(ii).

An entity that is a territory financial institution (territory FI) (as defined in § 1.1471–1(b)(130)) or a nonparticipating FFI (as defined in § 1.1471–1(b)(82)) may not apply for a QI agreement.

The QI agreement may be entered into by a foreign corporation that is an NFFE (as defined in § 1.1471–1(b)(80)) described in § 1.1441–1(e)(5)(ii)(C) or that is an eligible entity seeking to become a QDD. For example, an entity may seek to obtain QI status to present claims of benefits under an income tax treaty on behalf of its shareholders or other persons (other than FFIs) for which the foreign corporation acts as an intermediary. An NFFE

that enters into a QI agreement to act on behalf of its shareholders must meet and agree to assume the obligations of, and to be treated as, a direct reporting NFFE under § 1.1472–1(c)(3). An NFFE that enters into a QI agreement to act on behalf of persons other than its shareholders will be required to satisfy the withholding and reporting requirements of §§ 1.1472–1(a) and 1.1474–1(i) with respect to any NFFE that is a beneficial owner for whom the QI is acting with respect to a withholdable payment. The QI agreement does not apply to a foreign partnership or foreign trust. A foreign partnership or foreign trust may seek to qualify as a withholding foreign partnership or withholding foreign trust. See § § 1.1441–5(c)(2)(ii) and 1.1441–5(e)(5)(v). In light of the changes that will be made to the WP agreement discussed in section 2.11 of this Notice, Treasury and the IRS expect to eliminate the allowance for NFFEs acting on behalf of their shareholders to be QIs. Comments are requested regarding the types of entities and situations where an NFFE would be seeking to act as a QI on behalf of its shareholders (other than a reverse hybrid entity described in section 2.11 of this Notice) and why the WP agreement does not provide a solution for those entities.

.02 Prospective QI (Including QI Act- ing as a QDD) . Prior to submitting Form 14345, Qualified Intermediary Application, a prospective QI (other than an NFFE that is not acting as an intermediary on behalf of its shareholders and certain foreign central banks of issue) must have submitted the information specified in Form 8957, Foreign Account Tax Compli- ance Act (FATCA) Registration, through the FATCA registration website available at www.irs.gov/FATCA, and obtained its chapter 4 status as a participating FFI (including a reporting Model 2 FFI), registered deemed-compliant FFI (including a reporting Model 1 FFI and a nonreporting Model 2 FFI treated as registered deemedcompliant), registered deemed-compliant Model 1 IGA FFI (as defined in section 2.17(C) of the proposed QI agreement), direct reporting NFFE, or sponsoring entity of a direct reporting NFFE, as applicable, along with a global intermediary identification number (GIIN) to be used to identify itself to withholding agents and to

tax administrators for FATCA reporting (the GIIN is separate from the QI-EIN).

To become a QI, a prospective QI must submit Form 14345, Application for Qualified Intermediary, Withholding For- eign Partnership, or Withholding Foreign Trust Status, in the manner provided by the form or accompanying instructions. An application must also include any additional information and documentation requested by the IRS. The Form 14345 must establish, to the satisfaction of the IRS, that the applicant has adequate resources and procedures to comply with the terms of the QI agreement. An entity that would like to become a QI to act as a QDD must apply to enter into a QI agreement and include the information relating to QDDs.

If the IRS approves the QI application, it will notify the QI of its approval. The approval notice will include a QI-EIN for fulfilling the requirements of a QI (including a QI acting as a QDD if approved for such purpose) under chapters 3, 4, and 61 and sections 871, 881, and 3406, including making tax deposits and filing Forms 945, 1042, 1042–S, 1099, and 8966. The IRS will not enter into a QI agreement with an FFI if the IRS has not approved the “know-your-customer” practices and procedures for opening accounts of the jurisdiction where the FFI is located because the QI agreement as applicable to an FFI allows for the use of documentary evidence obtained under a jurisdiction’s “know-your-customer” practices. A list of jurisdictions for which the IRS has received know-your-customer information and for which the know-your-customer rules are acceptable (approved KYC jurisdiction) is available at: http://www.irs.gov/ Businesses/International-Businesses/List- of-Approved-KYC-Rules . To request approval of a jurisdiction’s know-yourcustomer rules, contact the KYC coordinator in the Foreign Intermediaries Program at the address provided in section 3.03 of this Notice.

A QI that is an NFFE generally is not required to be located in an approved KYC jurisdiction because an NFFE is required to collect Forms W–8 and W–9 and may not apply the KYC documentation practices and procedures. See section 5.01(A)(2) of the proposed QI agreement

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for the documentation requirements applicable to a QI that is an NFFE.

.03 Existing QI . An FFI that seeks to renew its QI agreement must do so through the FATCA registration website available at www.irs.gov/FATCA . An NFFE that is a direct reporting NFFE or a sponsoring entity of a direct reporting NFFE must also renew its QI agreement through the FATCA registration website. The QI will retain its QI-EIN to fulfill the requirements of a QI under chapters 3, 4, and 61 and sections 871, 881, and 3406, including making tax deposits and filing Forms 945, 1042, 1042–S, 1099, and 8966. A QI that seeks to renew its QI agreement and also seeks to act as a QDD must supplement the renewal request by providing a statement containing all information required by Form 14345 relating to a QDD (but does not have to provide a new Form 14345).

A QI that is an NFFE and that is not acting as a QI on behalf of its shareholders, and is not a sponsoring entity, must renew its QI agreement by submitting a request for renewal to the Foreign Intermediaries Program at the following address:

Internal Revenue Service Foreign Payments Practice Foreign Intermediaries Program 290 Broadway, 12th Floor NW New York, New York 10007–1867 Attention: QI Applications