[Federal Register Volume 62, Number 198 (Tuesday, October 14, 1997)]
[Proposed Rules]
[Pages 53504-53506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26001]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-107872-97]
RIN 1545-AV27


Electronic Transmission of Form W-8

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations relating to the 
submission of Form W-8, a withholding certificate, needed for purposes 
of chapters 3 and 61 of the Internal Revenue Code (Code) and other 
withholding or reporting provisions of the Code, such as section 3402, 
3405, or 3406. The proposed regulations provide guidance to withholding 
agents and payors who wish to establish an electronic system for use by 
beneficial owners or payees in furnishing Form W-8. The proposed 
regulations state the general requirements that such an electronic 
system must satisfy so that a withholding agent or payor may rely on a 
Form W-8 transmitted through such a system. These regulations affect 
withholding agents and payors that establish electronic systems and 
beneficial owners and payees who use these systems.

DATES: Written comments and requests for a public hearing must be 
received by January 12, 1998.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-107872-97), room 
5228, Internal Revenue Service, POB 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand delivered between the 
hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-107872-97), Courier's 
Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., 
Washington, DC. Alternatively, taxpayers may submit comments 
electronically via the Internet by

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selecting the ``Tax Regs'' option on the IRS Home Page, or by 
submitting comments directly to the IRS Internet site at 
www.irs.ustreas.gov/prod/tax__regs/comments.html.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Lilo 
Hester, 202-622-3840; concerning submissions, Evangelista Lee, 202-622-
8452 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Income Tax 
Regulations (26 CFR part 1) under section 1441 of the Internal Revenue 
Code (Code). These amendments are proposed to provide general 
procedures for withholding agents and payors to establish acceptable 
electronic systems.
    Final regulations published in the Rules and Regulations section of 
this issue of the Federal Register add Sec. 1.1441-1(e)(4)(iv) which 
authorizes the electronic transmission of a Form W-8 described in 
Sec. 1.1441-1(e)(1)(i). In addition, by cross-reference contained in 
Sec. 1.6049-5(c)(2) (published as a final rule in the Rules and 
Regulations section of this issue of the Federal Register), the 
regulation authorizes electronic transmission of a Form W-8 furnished 
for purposes of chapter 61 of the Code (i.e., information reporting) or 
for purposes of another income tax withholding provision of the Code, 
such as section 3406.
    Pursuant to chapter 3 (or, in certain cases, chapter 61) of the 
Code, a beneficial owner or a payee (i.e., a person who receives a 
payment) must furnish a withholding certificate to a withholding agent 
or payor in order to establish its status as a foreign person and 
entitlement to a reduced rate of withholding. By establishing foreign 
status, and other relevant characteristics, a beneficial owner or payee 
may be entitled to a reduction or exemption in the amount of 
withholding under chapter 3 of the Code or an exemption from 
information reporting under chapter 61 of the Code or from backup 
withholding under section 3406. The receipt of a withholding 
certificate affects the amount of tax that the withholding agent or 
payor may be required to withhold from the payment, and the type and 
form of information that it must provide to the IRS. The regulations 
under sections 1441 and 1443 specifically identify Form W-8 (or an 
acceptable substitute form) as the required form of the withholding 
certificate.
    These proposed regulations apply to electronic transmission of 
Forms W-8. The regulations do not apply to Form 8233 for use by 
individuals who claim a reduced rate of withholding under an income tax 
convention for services performed in the United States. See 
Sec. 1.1441-4(b)(2). In addition, the regulations do not apply to 
documentary evidence (described in Sec. 1.6049-5(c)(1)) that may be 
substituted for the Form W-8 with respect to certain payments made to 
accounts maintained outside of the United States. However, the IRS and 
Treasury invite comments on any computer technology (e.g., imaging) 
that could make electronic transmission of documentary evidence 
possible.

Explanation of Provisions

1. Type and Design of System Determined by Withholding Agent or Payor 
Subject to Specific Requirements

    Under the proposed regulations, a withholding agent or payor may 
choose to establish an electronic system to receive or transmit Forms 
W-8 (or such other form as the IRS may prescribe), including a payor or 
withholding agent that is an intermediary. The withholding agent or 
payor may determine the type of system (such as telephone or computer) 
available for that purpose. The system must, however, (1) reliably 
identify the user, (2) ensure that the information received is the 
information sent, and (3) document occasions of user access that result 
in a submission, renewal, or modification of the withholding 
certificate. The proposed regulations envision that implementation of 
these specific requirements necessitates a direct relationship between 
the withholding agent or payor and the beneficial owner or payee. The 
proposed regulations reserve on applicable standards for systems used 
by intermediaries to transmit forms received from another payor or 
withholding agent. The IRS and Treasury recognize the importance of 
allowing the electronic transmission of Forms W-8 through one or more 
intermediaries (i.e., persons not acting for their own account). 
Therefore, comments are solicited regarding the logistical operation of 
an electronic transmission system for use by an intermediary satisfying 
the IRS requirements that the integrity, accuracy, and reliability of 
the original electronic transmission through an intermediary system is 
adequately protected.

2. Relationship Between Paper and Electronic Withholding Certificate

    The electronic transmission must contain exactly the same 
information as the paper Form W-8 (or such other form as the IRS may 
prescribe). Any guidance, such as regulations or instructions, that 
applies to the paper Form W-8 also applies to electronically 
transmitted forms.

3. Electronic Filing Optional

    Section 1.1441-1(e)(4)(iv) authorizing the use of electronic 
systems was promulgated to assist in reducing burdens (in terms of cost 
and time) on withholding agents, payors, payees, and beneficial owners. 
The use of an electronic system for the transmission of Form W-8 is 
merely an alternative to the use of a paper form. Electronic 
transmission of Form W-8 is not mandatory. A withholding agent or payor 
may not mandate the use of electronic systems to receive or transmit 
the forms. Thus, a payee or beneficial owner may furnish a Form W-8 to 
the withholding agent or payor on paper.

4. Signature Under Penalties of Perjury

    Section 6061 generally provides that any return, statement, or 
other document required to be made under any provision of the internal 
revenue laws or regulations shall be signed in accordance with forms or 
regulations prescribed by the Secretary. Section 301.6061-1(b) provides 
that the Secretary may prescribe in forms, instructions, or other 
appropriate guidance the method of signing any return, statement, or 
other document required to be made under any provision of the internal 
revenue laws or regulations. Section 6065 provides that, except as 
provided by the Secretary, any return, statement or other document 
shall contain or be verified by a written declaration that it is made 
under the penalties of perjury. These requirements apply to a Form W-8 
(or such other form as the Internal Revenue Service may prescribe), 
including one that is filed electronically, as provided in Sec. 1.1441-
1(e)(2)(ii), (3)(ii), (3)(iii), and (3)(v), and Sec. 1.1441-5(c)(2)(iv) 
and (3)(iii) of the final regulations. The proposed regulations, 
therefore, include guidance on the perjury statement and the signature 
requirements for Forms W-8 that are filed electronically.

5. IRS Requests for Electronic Data

    Upon request by the IRS in the course of an examination, a 
withholding agent or payor must supply a hard copy of the information 
contained on the electronically transmitted Form W-8 and a statement 
that, to the best of the

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withholding agent's knowledge, the electronic Form W-8 was furnished by 
the person whose name is on the form. The printout of the Form W-8 
information must be provided to the IRS in English.

Proposed Effective Date

    These regulations are proposed to become effective January 1, 1999.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It also has been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
does not apply to these regulations, and, because the proposed 
regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Code, this notice of proposed 
rulemaking will be submitted to the Small Business Administration for 
comment on its impact on small business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight copies) that are submitted timely (in the manner described in 
the ADDRESSES portion of this preamble) to the IRS. All comments will 
be available for public inspection and copying.
    A public hearing may be scheduled if requested in writing by any 
person that submits written comments. If a public hearing is scheduled, 
notice of the date, time, and place for the hearing will be published 
in the Federal Register.
    Drafting Information: The principal author of these regulations is 
Lilo A. Hester, Office of the Associate Chief Counsel (International), 
IRS. However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. In Sec. 1.1441-1, paragraph (e)(4)(iv) is revised to read 
as follows:


Sec. 1.1441-1  Requirement for the deduction and withholding of tax on 
payments to foreign persons.

* * * * *
    (e) * * *
    (4) * * *
    (iv) Electronic transmission of information--(A) In general. A 
withholding agent may establish a system for beneficial owners or 
payees to furnish electronically Forms W-8 (or such other form as the 
Internal Revenue Service may prescribe). The system also may enable the 
withholding agent to electronically transmit Forms W-8 to another 
person. The system must meet the requirements described in paragraph 
(e)(4)(iv)(B) of this section.
    (B) Requirements--(1) In general. The electronic system must ensure 
that the information received is the information sent, and must 
document all occasions of user access that result in the submission, 
renewal, or modification of a Form W-8. In addition, the design and 
operation of the electronic system, including access procedures, must 
make it reasonably certain that the person accessing the system and 
furnishing Form W-8 is the person named in the form.
    (2) Same information as paper Form W-8. The electronic transmission 
must provide the withholding agent or payor with exactly the same 
information as the paper Form W-8.
    (3) Perjury statement and signature requirements. The electronic 
transmission must be signed by way of an electronic signature by the 
person whose name is on the Form W-8 and the signature must be under 
penalties of perjury in the manner described in this paragraph 
(e)(4)(iv)(B)(3).
    (i) Perjury statement. The perjury statement must contain the 
language that appears on the paper Form W-8. The electronic system must 
inform the person whose name is on the Form W-8 that the person must 
make the declaration contained in the perjury statement and that the 
declaration is made by signing the Form W-8. The instructions and the 
language of the perjury statement must immediately follow the person's 
certifying statements and immediately precede the person's electronic 
signature.
    (ii) Electronic signature. The act of the electronic signature must 
be effected by the person whose name is on the electronic Form W-8. The 
signature must also authenticate and verify the submission. For this 
purpose, the terms authenticate and verify have the same meanings as 
they do when applied to a written signature on a paper Form W-8. An 
electronic signature can be in any form that satisfies the foregoing 
requirements. The electronic signature must be the final entry in the 
person's Form W-8 submission.
    (4) Requests for electronic Forms W-8 data. Upon request by the 
Internal Revenue Service during an examination, the withholding agent 
must supply a hard copy of the electronic Form W-8 and a statement 
that, to the best of the withholding agent's knowledge, the electronic 
Form W-8 was filed by the person whose name is on the form. The hard 
copy of the electronic Form W-8 must provide exactly the same 
information as, but need not be a facsimile of, the paper Form W-8.
    (C) Special requirements for transmission of Forms W-8 by an 
intermediary. [Reserved].
* * * * *
Michael P. Dolan,
Acting Commissioner of Internal Revenue.
[FR Doc. 97-26001 Filed 10-6-97; 8:45 am]
BILLING CODE 4830-01-P