Section 3. Additional — Internal Revenue Bulletin 2016-29

A. Reporting of Sample Plan for Samples not Utilizing the Safe Harbor .

When not utilizing the safe harbor statistical sampling plan in this Appendix, the reviewer should provide in its periodic review report a description of the sampling methodology used. If the reviewer used a statistical sampling plan other than the safe harbor statistical sampling plan described in this Appendix, the reviewer should provide the information described in Rev. Proc 2011–42 Appendix A) Sampling Plan Standards and Appendix B) Sampling Documentation Standards for Sample Execution Documentation, in addition to any information required by this Appendix.

B. Determination of Underwithholding . If the reviewer determines that underwithholding has occurred with respect to the sampled accounts, QI shall report and pay, in accordance with the requirements of the QI Agreement, the underwithheld tax determined under the IRS projection method described in section 3.D. The QI will also notify the IRS Financial Intermediaries Program at the address provided in section 12.06 of the QI Agreement of any underwithholding discovered as a result of the review. Alternatively, the QI can propose to the IRS another amount of underwithholding based on section 3.B of this Appendix. For this purpose, QI agrees to provide the IRS with the information ( e.g ., number of accounts, associated amounts, stratum locations of adjusted items, etc.) required to project the underwithholding. If the IRS does not agree with the amount proposed by QI, the IRS shall assess a tax under the procedures set forth in the Code.

C. QDD Tax Liability . If the reviewer determines that QI acting as a QDD has not fully satisfied its QDD tax liability (as described in section 3.09 of the QI Agreement),QI must report and pay the amount owed in accordance with the requirements of the QI Agreement. A QI acting as a QDD may not use a projection method to determine the amount of underpayment of its QDD tax liability.

D. Projection . If the reviewer has determined that underwithholding has occurred with respect to the sample, based on the original assessment of the reviewer without regard to any remediation or curing after the selection of the sample units for review, then the reviewer will determine the total amount of underwithheld tax by utilizing a projection method, except as provided in section 3.C of this Appendix. If the reviewer is using a method other than the safe harbor statistical sampling plan described in this Appendix, QI shall contact the Financial Intermediaries Team to agree to a projection method. If the review is using the safe harbor statistical sampling plan, then the reviewer may determine the amount of underwithheld tax by projecting the underwithholding over the entire stratum of similar sampling units using the following method:

(a) Divide the amount of underwithholding for the stratum (as originally determined by the reviewer without regard to any remediation or curing after the reviewer selected the sample units to be reviewed) by the number of sampling units in the sample;

(b) Multiply the result in (a) by the total number of sampling units in the stratum; and (c) Subtract from (b) the actual amount of any cured underwithholding. (d) Total all amounts for (c) for all strata. If the reviewer has determined that overwithholding has occurred with respect to the sample, the reviewer may not project the amount of overwithholding in order to claim a refund. The reviewer may offset any underwithholding against any overwithholding in the sample, provided that QI enters into a closing agreement (Form 906) that QI will not file a claim for refund for any overwithholding that the reviewer has discovered.

If after reviewing the periodic review report, the IRS determines that further action is necessary with respect to underwithholding, the IRS may request that QI have the reviewer conduct a full review of the entire sample or may determine that it is not appropriate to project an amount of underwithholding. In making such determination, the IRS will consider whether: (1) the amount is the consequence of an identified error; (2) the error was not repeated throughout the population over which it would be projected; (3) QI has corrected the error; (4) QI has established safeguards to prevent reoccurrence of the error; and (5) facts as corrected show that there was actually no underwithholding during the compliance period.

The QI may also propose an alternative projected underwithholding tax adjustment based on facts and circumstances. E. Reporting of Sample Results . At a minimum, the reviewer should note the following separately for each sample by stratum in its periodic review report:

(1) The steps taken to construct the sample population and the steps taken to ensure all accounts subject to review were included in the populations of accounts and subject to sampling under the procedures outlined in this Appendix;

(2) Original population and sample statistics as follows: (1) Total number of sample units in the population; (2) Total number of sample units in the sample; (3) Total reportable amounts for foreign recipients for the population; (4) Total reportable payments for U.S. recipients for the population; (5) Total reportable amounts for foreign recipients for the sample; (6) Total reportable payments for U.S. recipients for the sample; (7) Total chapter 3 withholding for the population; (8) Total backup withholding for the population;

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(9) Total chapter 4 withholding for the population; (10) Total chapter 3 withholding for the sample; (11) Total backup withholding for the sample; and (12) Total chapter 4 withholding for the sample. Additionally, the reviewer should note a reconciliation of amounts included in the sample population to payments and withholdings of reportable amounts as detailed in Part IV sections E (Reconciliations of Reporting on Payments of Reportable Amounts) and F (Reconciliation of Withholding on Reportable Amounts) of Appendix I to the QI Agreement.

2015 Section 45K(d)(2)(C) Reference Price

Notice 2016–43